UK Student Finance
An A-Z of Student Finance

How are Student Loan Repayments Calculated?

If you started your course in or after 1998, the amount you repay on your student loan will be based on how much you earn. You can use a repayment calculator to estimate your repayments.

How Student Loan Repayments are Calculated

You will begin making student loan repayments when you are earning:

£15,000 a year

or the equivalent of:

£1,250 a month; or

£288 a week

Your student loan repayments will be nine per cent of anything you earn over these amounts.

Remember that this isn’t the same as nine per cent of your total income – you only make repayments on the amount you earn over the yearly, monthly or weekly thresholds.

Different rules apply if you took out a student loan for a course starting before 1998.

Example 1: Jane

Jane is employed, and pays her taxes by Pay As You Earn (PAYE).

She earns £1,500 a month – which is £250 over the repayment threshold.

Jane’s student loan repayments will be nine per cent of £250: £22 a month

Example 2: Robert

Robert is employed but also has income from other sources (for example, renting property, investments, personal pension).

He earns £14,000 per year, and gets a further £2,500 in unearned income – which is £1,500 over the repayments threshold.

Robert’s student loan repayments will be nine per cent of £1,500: £135 per year

Calculating Interest on your Student Loan

The interest rate charged on student loans is linked to the rate of inflation, in line with the Retail Prices Index.

The current interest rate is 2.4 per cent.

The amount of loan you pay back will be more or less the same value as the amount you borrow – no one makes any profit on the loan. Interest accrues on your loan until it has been repaid in full. The interest rate for student loans applies from 1 September to 31 August each year.

If you are repaying by PAYE or Self Assessment, interest accrual will be suspended from the start of the tax year until the end-of-year repayment details are received from HM Revenue & Customs (HMRC). What this means is that no interest will be applied to your account until the end of the tax year.

Interest for the previous year will then be calculated and applied to your account upon receipt of your repayment details.

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