What is the Threshold for Student Loan Repayment in 2024/25?

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Threshold for Student Loan Repayment

Student loans are a major financial consideration for graduates in the UK. Repayment terms vary depending on the type of loan taken and understanding these rules is essential to managing finances effectively.

For the 2024/25 financial year, the UK government has set specific repayment thresholds based on different loan plans.

Borrowers need to be aware of these thresholds, as they directly impact when deductions from salaries begin and how much must be repaid. Additionally, factors such as income levels, employment status, and interest rates influence the repayment process.

This guide provides a detailed breakdown of the student loan repayment threshold for 2024/25, explaining how repayments work, recent changes, and what borrowers should expect.

Whether you are employed, self-employed, or working overseas, understanding these repayment terms will help you plan your finances more efficiently.

What is the Threshold for Student Loan Repayment in 2024/25?

What is the Threshold for Student Loan Repayment?

In the UK, student loan repayments are categorized into different plans. Each plan has a unique repayment threshold, interest rate, and repayment structure. The four main types of student loan repayment plans are:

Plan 1

  • Plan 1 student loan applies to students who started university in England or Wales before September 2012 and borrowers in Northern Ireland.
  • The repayment threshold for 2024/25 is £24,990 per year.
  • Borrowers repay 9% of earnings above this threshold.
  • Interest rates are typically linked to inflation (Retail Price Index – RPI) or the Bank of England base rate plus 1%, whichever is lower.

Plan 2

  • For students who started university in England or Wales from September 2012 onwards.
  • The repayment threshold for 2024/25 is £27,295 per year.
  • Repayments are 9% of earnings exceeding the threshold.
  • Interest rates are linked to RPI, ranging from RPI to RPI + 3%, depending on income.

Plan 4

  • Applicable to students who took out loans in Scotland.
  • The repayment threshold for 2024/25 is £31,395 per year.
  • Repayments are 9% of earnings above the threshold.
  • Interest rates follow RPI adjustments.

Postgraduate Loan

  • For those who borrowed for postgraduate master’s or doctoral degrees.
  • The repayment threshold for 2024/25 is £21,000 per year.
  • Repayments are 6% of earnings above the threshold.
  • Interest rates are typically RPI + 3%.

Each plan has different conditions, and knowing which plan applies to your loan helps in understanding repayment responsibilities.

For the 2024/25 tax year, the government has set the following student loan repayment thresholds:

Loan Plan Repayment Threshold Repayment Rate
Plan 1 £24,990 per year 9% above threshold
Plan 2 £27,295 per year 9% above threshold
Plan 4 £31,395 per year 9% above threshold
Postgraduate Loan £21,000 per year 6% above threshold

These thresholds apply to both employed and self-employed borrowers. Repayments begin once annual earnings exceed the threshold, with deductions made through PAYE for employees or via self-assessment tax returns for the self-employed.

What Are the Changes to Student Loan Repayments in 2024/25?

Several key changes have been introduced for the 2024/25 student loan repayment system, affecting both new and existing borrowers:

  • Plan 2 and Plan 4 thresholds remain frozen – No increase in repayment thresholds means that as wages rise, more graduates will start repaying their loans.
  • Plan 1 threshold increased slightly – Rising to £24,990, this provides a minor benefit to borrowers, reducing the repayment amount for some.
  • Interest rate changes – Student loan interest rates, linked to inflation (RPI), may fluctuate depending on economic conditions.

These changes impact the total repayment amount and the time required to clear the loan.

How is the Student Loan Repayment Calculated?

How is the Student Loan Repayment Calculated?

Student loan repayments are calculated as a percentage of earnings exceeding the threshold. The calculation steps are as follows:

  1. Identify your annual income – This includes salary, bonuses, and taxable income.
  2. Determine your loan plan – Each plan has a different repayment threshold.
  3. Calculate the earnings above the threshold – Only the amount exceeding the threshold is subject to repayment.
  4. Apply the repayment percentage
  • Plan 1, Plan 2, and Plan 4: 9% of earnings above the threshold
  • Postgraduate Loans: 6% of earnings above the threshold

For example, if an individual on Plan 2 earns £30,000 per year:

  • Repayment threshold: £27,295
  • Earnings above threshold: £30,000 – £27,295 = £2,705
  • Repayment: 9% of £2,705 = £243.45 per year

This amount is deducted automatically via PAYE for employees or calculated in self-assessment for the self-employed.

What Happens if You Earn Below the Repayment Threshold?

If your income is below the repayment threshold in 2024/25, you are not required to make any repayments.

The repayment system is designed to be income-contingent, meaning that repayments only begin when earnings exceed the threshold set for your specific loan plan.

Key Points to Consider in 2025:

  • You do not need to make any repayments if your income is below the repayment threshold.
  • No penalties, late fees, or additional interest charges are applied if you are not required to make payments.
  • Automatic resumption of repayments – If your income rises above the threshold in the future, repayments will start automatically through PAYE for employees or self-assessment for the self-employed.
  • Threshold reviews – The government typically reviews student loan thresholds every April. If economic conditions or inflation significantly change in 2025, thresholds may be adjusted.
  • Repayment holidays or financial hardship support – While the UK does not offer formal repayment holidays, borrowers experiencing long-term financial difficulties can contact the Student Loans Company (SLC) for advice on managing repayments.

For borrowers working part-time or experiencing temporary income reductions, the flexible nature of income-based repayments ensures that student loan obligations do not become an additional financial burden.

What Are the Interest Rates on Student Loans in 2024/25?

What Are the Interest Rates on Student Loans?

The interest rates applied to student loans vary depending on the loan plan. These rates are influenced by factors such as the Retail Price Index (RPI), the Bank of England base rate, and government policy decisions.

Interest Rates by Plan in 2024/25

  • Plan 1: The lower of RPI or Bank of England base rate + 1%.
  • Plan 2 & Postgraduate Loans: Interest rate linked to RPI and income, typically ranging from RPI to RPI + 3%.
  • Plan 4: Interest rates generally follow RPI adjustments, but government policies may alter this.

Key Updates and Expected Changes for 2025

  • RPI-Based Adjustments – The latest Retail Price Index (RPI) figure is usually announced in March or April. If inflation is high, interest rates on Plan 2 and postgraduate loans could increase, affecting borrowers’ overall debt.
  • Interest Rate Cap Possibility – In previous years, the government capped interest rates on student loans when inflation was excessively high. If economic conditions in 2025 result in steep inflation, a similar cap could be introduced.
  • Review of Interest Rate Calculations – Discussions have been ongoing regarding potential changes to the way interest rates are applied to student loans. If policy reforms are introduced in 2025, borrowers may see modifications in how interest accrues on their balances.
  • Impact of Economic Changes – The Bank of England base rate has fluctuated significantly in recent years. If rates drop in 2025, Plan 1 borrowers may benefit from lower interest rates on their student loans.

Since student loan interest rates directly impact the total amount repayable, borrowers should keep an eye on government announcements and annual interest rate reviews to stay informed about potential changes in 2025.

What Happens if You Move Abroad?

If a borrower moves abroad, they must continue repaying their UK student loan based on their overseas income.

Unlike those employed in the UK who have repayments deducted through PAYE, borrowers living abroad need to make direct payments to the Student Loans Company (SLC).

Key Policies for Borrowers Living Overseas in 2024/25

  • Repayment thresholds vary by country – The SLC sets different repayment thresholds depending on the cost of living in the country where the borrower resides.
  • Borrowers must inform the SLC before leaving the UK – Failure to notify the SLC about an overseas move could result in penalties or enforcement actions.
  • Direct payments required – Since PAYE deductions do not apply, borrowers must submit income details to the SLC and arrange manual repayments.

What Happens if You Do Not Repay Your Student Loan?

What Happens if You Do Not Repay Your Student Loan?

Failure to make student loan repayments when required can have several consequences. While student loans do not impact credit scores directly, ignoring repayment responsibilities can lead to complications.

Key Points to Consider:

  • Automatic PAYE Deductions – If employed, repayments are automatically deducted through the payroll system, reducing the chances of missing payments.
  • Self-Assessment Responsibilities – Self-employed borrowers must declare and pay their student loan repayments through the self-assessment process.
  • Legal Consequences for Overseas Borrowers – Those who fail to notify the Student Loans Company (SLC) about their income while living abroad may face penalties or legal action.
  • Debt Recovery Measures – The SLC has the authority to take legal action against borrowers who deliberately avoid repayments.

If you are struggling to make repayments due to financial hardship, it is advisable to contact the Student Loans Company to discuss possible solutions.

When is a Student Loan Written Off?

Student loans in the UK are not required to be repaid indefinitely. Depending on the loan plan, loans are written off after a specific period.

Loan Write-Off Timeframes:

  • Plan 1 – Written off when the borrower turns 65 or after 25 years (whichever comes first).
  • Plan 2 – Written off 30 years after repayments start.
  • Plan 4 – Written off 30 years after repayments start.
  • Postgraduate Loans – Written off after 30 years.

For many borrowers, the full loan amount may never be repaid before it is written off, especially if earnings remain below the repayment threshold for most of their career.

How Do Student Loan Repayments Affect Your Credit Score?

How Do Student Loan Repayments Affect Your Credit Score?

Unlike other forms of debt, student loans do not appear on credit reports and therefore do not affect credit scores. However, there are a few indirect effects to be aware of:

  • Mortgage Applications – Lenders may assess student loan repayments as part of an affordability check, as it reduces disposable income.
  • Debt-to-Income Ratio – While student loans are not considered traditional debt, they can influence how much a lender is willing to offer for mortgages or other large loans.
  • Repayments from Salary – Since student loan repayments are deducted automatically through PAYE, they do not appear as missed payments on a credit file.

Overall, while student loans do not harm credit scores, they may affect borrowing capacity for other financial commitments.

Do Student Loan Repayments Change if You Switch Jobs?

Yes, student loan repayments are based on earnings, not employment type. If you switch jobs, the following factors will determine whether your repayments change:

  • Salary Increase or Decrease – If your income rises above your plan’s repayment threshold, repayments will increase. If earnings drop below the threshold, repayments pause.
  • PAYE System Adjustments – Employers automatically deduct repayments from wages if the borrower earns above the threshold.
  • Self-Employed Tax Declarations – If you move from employment to self-employment, repayments must be calculated and paid through self-assessment tax returns.

It is important to check pay slips after starting a new job to ensure correct deductions are being made.

Can You Repay Your Student Loan Early, and Is It Worth It?

Can You Repay Your Student Loan Early and Is It Worth It?

Borrowers have the option to make voluntary repayments towards their student loans, but it is not always financially beneficial.

Pros of Early Repayment

  • Reduces total interest accrued over time.
  • Clears debt faster, improving financial flexibility.
  • Provides peace of mind by eliminating future obligations.

Cons of Early Repayment

  • Most loans are written off before full repayment – Many borrowers may never fully repay their loans, meaning extra payments may not be necessary.
  • Money could be used elsewhere – Investing in savings, a mortgage deposit, or retirement funds may be more beneficial than overpaying a student loan.
  • Interest rates may be lower than inflation – If student loan interest rates remain low, the value of the debt decreases over time in real terms.

Before making additional repayments, borrowers should assess their long-term financial goals and whether early repayment provides real benefits.

Are Student Loan Repayments Different for Self-Employed Individuals?

Yes, self-employed individuals must manage their student loan repayments differently from those who are employed. Instead of automatic PAYE deductions, self-employed borrowers must:

  1. Declare earnings in self-assessment tax returns – Repayments are calculated based on total taxable income.
  2. Pay through HMRC – Once tax returns are processed, repayments are collected by HMRC.
  3. Make repayments in lump sums – Unlike monthly salary deductions, self-employed borrowers pay annually based on their total income for the year.

It is essential for self-employed individuals to budget for student loan repayments to avoid unexpected financial strain.

How Do Student Loan Repayments Work If You Work Abroad?

How Do Student Loan Repayments Work If You Work Abroad?

Graduates who move abroad must still make student loan repayments based on their earnings. However, the repayment process works differently:

  • Different repayment thresholds apply – The SLC sets country-specific thresholds depending on the cost of living in that location.
  • Direct payments are required – Borrowers must arrange repayments directly with the Student Loans Company, as UK employers will no longer handle deductions.
  • Failure to report income can lead to penalties – Borrowers who do not inform the SLC about their income while overseas may face financial penalties or legal action.

It is crucial to update the SLC before relocating to avoid repayment issues.

Conclusion

Understanding student loan repayment thresholds for 2024/25 is crucial for managing finances efficiently.

Whether employed, self-employed, or working abroad, staying informed about repayment terms, interest rates, and possible loan write-offs helps borrowers make better financial decisions.

For many, student loan repayments function like an income tax, deducted automatically when earnings exceed the threshold.

While voluntary repayments are an option, they may not always be the best financial choice, depending on individual circumstances.

Keeping track of changes in repayment policies and knowing when a loan will be written off ensures that borrowers can navigate the system effectively without unnecessary financial strain.

FAQs

What happens if I lose my job or take unpaid leave?

If your income falls below the repayment threshold, repayments will pause automatically until your earnings increase again.

Can I defer my student loan repayments?

No, UK student loans do not require deferment, as repayments are income-based and automatically stop if earnings drop below the threshold.

Are student loan repayments tax-deductible?

No, student loan repayments are not tax-deductible in the UK.

What happens if I never earn above the repayment threshold?

If you never earn enough to repay your loan, it will be written off after 30 to 40 years, depending on the loan plan.

How can I check my student loan balance?

Borrowers can check their student loan balance by logging into their Student Loans Company (SLC) account or contacting SLC directly.

Can I stop repayments if I am struggling financially?

No, repayments are based on earnings. If your income falls below the threshold, repayments will automatically pause.

Will student loans affect my ability to get a mortgage?

Student loans do not affect credit scores, but they may reduce borrowing capacity as lenders consider loan repayments in affordability assessments.

How do I inform SLC about my income when living abroad?

Borrowers must complete an Overseas Income Assessment Form and submit income details to the Student Loans Company.

What happens to my student loan when I retire?

If a student loan has not been fully repaid by retirement age, it will be written off according to the loan plan’s terms.