| Year # | Year | Salary | Debt | Int. Rate % | Paid This Year | Interest This Year | Total Paid | Total Interest |
|---|
About this calculator
This student loan repayment calculator shows your repayments based on your current salary and your student loan's repayment threshold. Each row can be manually edited to account for jumps or dips in salary.
Student loan repayments in the UK are determined by the Student Loans Company. Repayments are calculated using the following formulas.
Plan 1
If your first year of university was before 2012, you received a Plan 1 loan. You will pay 9% of all pre-tax income above £18,935. For example, if you earn £21,000 per year you will pay 9% of £2,065; your annual repayment will be £185.85, or £15.49 per month. Note that these repayment thresholds are periodically updated to account for inflation. For example, the Plan 1 threshold has gradually increased from £17,500 to £18,935 over the last 3 years (as of June 2019).
Plan 2
Everyone who attended university on or after 2012 received a Plan 2 loan. You will pay 9% of all pre-tax income above £25,725. If you earn £25,725 or less you will pay nothing. If you earn £30,000 you will pay 9% of £4,275; your annual repayment will be £384.75, or £32.06 per month. As with the Plan 1 loans, these repayment thresholds will roughly increase with inflation (increasing from £21,000 to £25,000 in April 2018 and then to £25,725 in 2019).
SAAS Loans (Scotland)
Scottish students are issued student loans by the Student Awards Agency Scotland (SAAS). These loans used to be identical to the Student Loans Company's Plan 1 loans, except with a write off period of 30 years instead of 25 years (this was lowered from 35 years in 2019). They accrue the same rate of interest (1.75%) and have the same repayment threshold of £18,935.
When will my student loan be written off?
Student loans are written off a set number of years after the April of the year in which you became eligible to pay (i.e. the year you graduate). For those with a Plan 1 loan that period is 25 years; for those with a Plan 2 loan it is 30 years. Student loans issued before 2007 do not get written off until the borrower turns 65.
Your student loan is also written off if you die or become permanently disabled.
What happens if I move abroad?
This remains a grey area with countless myths surrounding what happens to your student loan when you move abroad. Most of those myths are just that.
Whilst living and working in the United Kingdom your taxes are deducted by HMRC, which includes your student loan repayments. HMRC has no jurisdiction outside of the United Kingdom, meaning that – in theory – they cannot take repayments by force. The task of collecting student loan repayments then falls to the Student Loan Company, whom you are ‘required’ to make voluntary repayments to. You are also required to notify them of your new address in your new resident country. Tales from honest citizens who have attempted to make these voluntary repayments have described it as a bureaucratic nightmare.
So, if you don't want to pay, you're in the clear... right?
Not quite. In 2016 the British government announced a fresh crackdown on borrowers no longer resident in the United Kingdom who have failed to repay their loans. The amount owed to the taxpayer is now into the hundreds of millions of pounds, giving the government a major incentive to track down overseas borrowers. Jo Johnson, Minister for Universities & Science, stated "[we will] take action to trace borrowers and consider sanctions against borrowers who breach loan repayment terms and, if necessary, prosecute." Despite this tough talk it is unclear what is meant by ‘sanctions’ and analysts have said that the cost of prosecuting borrowers is likely to exceed the debt itself.
The government is, however, beginning to get serious about this. Australia - the most popular destination for British expats - has recently agreed a data-sharing scheme that will enable the British authorities to chase down borrowers living in Australia. Similar schemes already exist between the United Kingdom, Sweden and the Netherlands. Under these schemes borrowers could be forced to make repayments like they are when resident in the United Kingdom.
Since repayments from other countries cannot be mandated and must be voluntary, the Student Loans Company has created a table of minimum earnings thresholds in local currencies both for Plan 1 and for Plan 2 students which covers most countries. This aims to assist borrowers in making their own repayment calculations that are to be sent back to the UK. For those planning to return to the UK it is worth noting that failure to respond to the Student Loan Company's requests for information will result in the maximum rate of interest being applied to your loan (a whopping 5.4% for Plan 2 students and a more modest 1.75% for Plan 1).
The short answer is that if you are planning to or you have already moved abroad you are probably safe... for now.
If I live abroad for 5-10 years, does my student loan get written off?
No, where you live has no impact on the status of your loan. This myth is so common throughout British universities that even members of staff have been known to repeat it.
Will my student loan impact my credit score?
No, your student loan will have no effect on your credit score. After all, British student loans, unlike American student loans, are implemented as a tax rather than a regular commercial loan.
How is interest calculated?
Plan 1 interest rates increased from 1.5% to 1.75% in September 2018.
Plan 2 interest rates are calculated based on your current circumstances. Whilst you are studying the debt you have currently accumulated will have an interest rate of the Retail Price Index (RPI) plus 3% (totalling 5.4% as of September 2019). RPI is a measure of inflation and the 3% adds an extra fee onto the interest rate. The ethics of adding 3% are for you to decide.
After graduation interest rates operate on a sliding scale based on your income. If you earn less than £25,725 only RPI is applied (2.4% as of September 2019). The scale gradually increases with income, capping at RPI + 3% when income is £41,000 or greater. Should you lose contact with the Student Loans Company, either by moving abroad without notification or simply not working without telling them, an interest rate of RPI + 3% is applied by default.
Plan 2 student loans incur a significantly higher rate of interest than Plan 1 loans. In 2012, when tuition fees were increased, the government effectively increased the price of student loans by adding above inflation interest rates. For example, in September 2019 the Retail Price Index was 2.4%, meaning that whilst in university a Plan 2 student loan was accumulating interest at a rate of RPI + 3%: 5.4% in total. The Plan 1 interest rate for the same year was 1.75%.
The Student Loans Company provides an historic list of interest rates for both Plan 1 and Plan 2 loans.
So, am I shackled with debt for the next 25-30 years?
No, not really. When tuition fees were raised in 2012 there was significant political posturing about how underprivileged students would no longer be able to afford university and that those who did attend would be in debt for the rest of their lives. In reality the raising of tuition fees and the new student loan system is more of a psychological barrier to entry than a financial one.
Student loans in the UK are effectively a graduate tax. For most people that tax will last 20+ years. You will pay a percentage of your income, just like a tax, and you will not be obliged to make monthly repayments like you would with a regular commercial loan. This is very different from student loans in the USA, which are commercial loans.
In practice, the main difference between a Plan 1 and a Plan 2 student loan is that Plan 2 loans are attached to such large debts that it becomes a greater psychological burden, as well as more difficult to pay off in full due to the higher interest rates. Many more people with Plan 2 loans will have to wait for the 30 year write-off period before they are free from the extra 9% tax. However, Plan 2 students have the advantage of only have to make repayments on earnings above £25,725, whereas Plan 1 students must make repayments on everything they earn above £18,935.
How can I find out how much student debt I have remaining?
You can create an account on the Student Loans Company website which will display your remaining debt and annual payments. This information is released on a yearly basis; a new system is expected in 2020 which should give graduates a more detailed and up to date view of the payments they are making.
You will receive an annual letter to your registered address detailing how much you paid, how much interest was incurred and your remaining balance for that tax year.
Can I repay more quickly?
If you plan on repaying your student loan in full and you want to accumulate as little interest as possible, you can manually make payments using your credit or debit card on the Student Loans Company website's repayment section. It is worth making careful calculations before overpaying, particularly for those with Plan 2 loans. Other than the very high earners, the high interest rate means most people with Plan 2 loans are better off waiting for the 30 year write-off period than they are trying to pay down the debt.