Student Loan Repayment

Due to the need for financial support young people often experience while undertaking their studies, student loans were created as means to help them on their path to becoming qualified and through that, employed. If you took out a student loan, you will only have to start repaying it after securing a regular source of income.

1. Student loans repayment through the Pay As You Earn system (PAYE)

In terms of repayment, student loans are classed as income contingent (this applies to courses started in or after 1998), meaning that the loan repayment rates are directly correlated with the amount of money you earn. In order to become liable for repaying your student loan, you must reach a minimum income level of 288 pounds per week, if you are paid weekly, or 1250 pounds per month, if you are paid monthly. A sum is then collected from your income each month, always representing 9% of what you earn over the minimum monthly threshold of 1250 pounds, which is a small amount in many cases and thus affordable. A variable income from one month to another does not complicate the situation, as long as it is positioned above the minimum level.

2. Student loans repayment when you are self employed       

If you are self employed, your student loan repayment will be made on a yearly basis, instead of a monthly one. You will be required to calculate the amount you should pay (you can obtain guidance for that from your local tax office) and make the payment at the same time as your tax return. This particular repayment method is referred to as ‘Self Assessment’. Moreover, you can contact the Student Loan Company for information regarding your future payments, especially if you think you have returned the complete amount you owed or that you might complete it soon, as it will help you assess your current and future financial situation with more precision.

3. Student loans repayment when you are employed and have additional income

If besides earning a regular income through employment, you have complementary sources of income (for instance, if you are self employed as well or have invested money and are receiving profits), you will have to use both payment methods, namely the Pay As You Earn system and Self Assessment, as the repayment will have to be calculated in concordance with your total remunerations.

4. Student loans repayment when you are working abroad

The key to the successful management of this situation is very close and accurate communication with the Student Loan Company, which will need to be informed about any changes to your location and earnings. Your repayment evaluation will change if you are overseas for more than three months, and will not revert to your former arrangements until you will have been back in the UK for more than three months. Your payments will be arranged through the Overseas Income Assessment Form, through which you will provide essential information regarding your employment status and expected future earnings abroad. Also, the minimum income level, above which you are liable for repaying your loan, might differ according to your location.