Students that have finished their studies and entered the workforce, must begin to make loan repayments from the April after they have finished their studies or when their income begins to exceed the annual threshold.
The annual threshold amounts for 2019-20 have been confirmed by the Department of Education. The thresholds will increase to £18,935 (2018-19: £18,330) for plan 1 and to £25,725 (2018-19: £25,000) for plan 2.
The terms of loan repayment for courses of study started before 01 September 2012 are referred to as ‘Plan 1’, and those started after 01 September 2012, are referred to as ‘Plan 2’. Repayments are deducted at a rate of 9% of income over the threshold.
The loans are also subject to varying levels of interest. The interest rates for Plan 2 repayments are based on the Retail Prices Index plus a variable rate dependent on income. The interest rates for Plan 1 repayments are significantly lower than for Plan 2 repayments.
Student Loans are part of the government’s financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying, and it is HMRC’s responsibility to collect repayments where the borrower is working in the UK.
The Student Loans Company (SLC) is directly responsible for collecting the loans of borrowers outside the UK tax system. Maintenance grants are also available under certain circumstances. The grants do not have to be repaid but do reduce the amount of maintenance loan a student is entitled to.