Student loans in the UK

The content of this section is related to student loans for those who started higher education after 1st September 1998. If you started before this date the situation is different and, thankfully, somewhat simpler. Details on this type of loan (and futher details on post 9/98 loans) may be obtained from the Student Loans Company.

When did this type of student loan start?
Income contingent loans started in August 1998 with the introduction of tuition fees.

When do I have to start repayments?
Repayments don’t start until the April after you graduate. Even then you won’t have to start repayments until you are earning above £10,000.

How is this paid?
This will be taken out of your salary at source in the same way as PAYE deductions.

How can they take money from my salary?
You provided your National Insurance number when applying for the loan.

When will I be informed?
In February after graduation the student loan company will write to you to let you know how much you owe.
Then in April you will receive a monthly repayment schedule. The inland revenue will be notified and these payments will be deducted from your salary.

What rate of interest will I be charged?
The interest rate is varies and is linked to inflation. This interest starts the day you get your first loan. For current interest rates see the student loans company.

What is the repayment rate?
The default rate is 9% on all income above £10,000. This may be increased by contacting the Student Loan Company.
Myth: My student loan will be automatically deducted from by wages at the appropriate level in the same way as my PAYE deductions.

Fact: Unfortunately neither your employer nor the Inland Revenue can be relied upon to be right in every case. It is important that you know how much you should be paying.

Example: Possible Tax Overpayments.

Overpayment may occur on switching employers. When leaving an employer you will be given a P45. This shows your employer how much tax you have paid over the previous year. This P45 does not show the amount of student loan repayments made whilst with your previous employer. Then when you receive your P60 at the end of the tax year any previous payments will not show on it.

Ultimately your new employer may tax you on gross salary without repayment deductions.

Solution:

Check how your loan payments have been shown on your payslip. Keep all payslips as proof of payment and earnings. Always compare March payslip with April P60.

If you establish you have been paying too much tax, contact the Inland revenue straight away. They will be able to calculate how much tax you should have paid, and how much you have. If there is a deficit you will receive a rebate.

For more information see the students loan company.