How Student Loans Work: A Complete UK Guide

Student loans help eligible students pay for university tuition fees and living costs. However, they work very differently from ordinary personal loans, credit cards and overdrafts.

You do not normally make fixed monthly payments based on how much you borrowed. Instead, repayments are linked to your income. You only repay when your earnings exceed the threshold for your student loan plan, and the amount deducted rises or falls with your pay.

This guide explains:

• What you can borrow

• Where the money goes

• How interest is added

• When repayments begin

• How much you could repay

• What happens if your income changes

• When the remaining balance is written off

• Whether student loans affect mortgages or credit scores

The figures in this guide were checked on 31 July 2026. Student loan thresholds, interest rates and rules can change, so always check the official terms for your particular loan.

What Is a Student Loan?

A student loan is government-backed borrowing designed to help eligible students pay for higher education.

Most undergraduate student finance consists of two separate loans:

1. A Tuition Fee Loan, which helps pay the university or college.

2. A Maintenance Loan, which helps the student pay for living costs.

Although these loans are arranged through your national student finance organisation, repayments are normally administered by the Student Loans Company.

The Student Loans Company is a government-owned, non-profit organisation that administers student loans and grants across the UK.

For a broader explanation of the funding available, read Student Finance Explained [Student Finance Explained].

Is a Student Loan the Same as a Normal Loan?

No. It is real borrowing, but it does not behave like a conventional bank loan.

With a normal personal loan, your repayments are usually based on:

• The amount borrowed

• The interest rate

• The agreed repayment period

With an income-contingent student loan, your compulsory repayments are primarily based on:

• Your income

• Your repayment plan

• The relevant repayment threshold

This means two graduates on the same salary and repayment plan will usually make the same compulsory repayment, even if one has a considerably larger outstanding balance.

The balance matters because it determines whether you eventually clear the loan. It does not normally determine the amount deducted from each payslip.

What Types of Student Loan Can You Receive?

Tuition Fee Loan

A Tuition Fee Loan helps pay the fees charged by your university or college.

For eligible full-time students funded through Student Finance England in the 2026/27 academic year, the standard maximum Tuition Fee Loan is £9,790. Some accelerated degrees can attract a higher maximum loan, while different limits apply to part-time courses and certain foundation years.

The loan is paid directly to your university or college. It does not enter your personal bank account. Payments are generally made in three instalments across the academic year after your attendance has been confirmed.

You can apply to borrow less than the maximum. However, you would need to pay any difference between your Tuition Fee Loan and the fee charged by the university.

Maintenance Loan

A Maintenance Loan is paid to you to help with living costs.

It may be used towards expenses such as:

• Rent and accommodation

• Food

• Transport

• Books and equipment

• Utilities

• Laundry

• Mobile phone and internet costs

• Social activities

• Course-related travel

Maintenance Loan payments are normally divided into instalments and deposited into your bank account during the academic year.

The amount available depends on factors such as:

• Where you normally live before university

• Where you will study

• Whether you live with your parents

• Whether you study in London

• Your household income

• Your course intensity

• Your personal circumstances

Read Maintenance Loans Explained [Maintenance Loans Explained] for a detailed guide to how living-cost support is calculated.

Who Actually Owes the Student Loan?

The student who applies for and receives the funding is responsible for the loan.

The loan is not taken out by the student’s parents, even when parental income is used to calculate Maintenance Loan entitlement.

A parent or partner may be asked to provide household income information, but this does not make them responsible for repaying the student’s loan.

How Is Your Student Loan Balance Calculated?

Your total student loan balance can include:

• Tuition Fee Loans

• Maintenance Loans

• Any eligible additional loan funding

• Interest added to those amounts

Suppose an English student borrowed:

• £9,790 in Tuition Fee Loan

• £10,830 in Maintenance Loan

Their borrowing for that year would be £20,620 before interest.

If they borrowed similar amounts for three years, their total borrowing could exceed £60,000 before interest. However, this does not mean that they must immediately repay £60,000 after graduating.

Their compulsory repayments would still be calculated using their income and repayment plan.

When Is Interest Added to a Student Loan?

Interest is charged from the date the first loan payment is made to you or your university. It continues to be added until the loan is fully repaid or cancelled.

Interest increases the outstanding balance. It does not usually change the percentage of your income deducted through the repayment system.

How does Plan 5 interest work?

For English undergraduate students starting courses on or after 1 August 2023, Plan 5 interest is generally linked to the Retail Price Index, known as RPI.

The Plan 5 interest rate was 3.2% between 1 September 2025 and 31 August 2026. Student loan rates can be limited by a prevailing market rate cap in certain circumstances.

Interest rates are reviewed and announced periodically, so the rate can change while you are studying and repaying.

Does interest mean your monthly repayment increases?

Not automatically.

Your compulsory monthly repayment is based on your income above the relevant threshold. An increased balance or interest rate does not directly increase the percentage deducted from your pay.

Interest matters most when deciding whether you are likely to:

• Repay the loan in full

• Continue making repayments until the write-off date

• Benefit from making voluntary overpayments

What Is a Student Loan Repayment Plan?

A repayment plan determines:

• The income threshold at which repayments begin

• The percentage of income you repay

• How interest is calculated

• When any remaining balance is cancelled

You do not normally choose your plan. It is determined by where you applied for student finance, when your course began and the type of course you studied.

Which student loan plan will you be on?

Student finance provider and course	Likely repayment plan
Student Finance England, undergraduate course beginning on or after 1 August 2023	Plan 5
Student Finance England, undergraduate course beginning from September 2012 to July 2023	Plan 2
Student Finance Wales, undergraduate course beginning on or after September 2012	Plan 2
Student Awards Agency Scotland	Plan 4
Student Finance Northern Ireland	Plan 1
Postgraduate master’s or doctoral loan from England or Wales	Postgraduate Loan plan

Older English and Welsh loans may fall under Plan 1, while particular course types can have different arrangements.

When Do You Start Repaying a Student Loan?

You do not begin repaying as soon as the first loan payment is made.

You normally become eligible to enter repayment from the April after you finish or leave your course. A deduction is only taken when your income is above the threshold for your repayment plan.

For example, an English student completing a Plan 5 undergraduate course in summer 2029 would normally become eligible to make repayments from April 2030.

If their income remained below the threshold, no compulsory repayment would be taken.

You can still become liable to repay after leaving a course without graduating. Student loans are not cancelled simply because you withdraw from university.

Student Loan Repayment Thresholds for 2026/27

The following thresholds apply from 6 April 2026:

Repayment plan	Annual threshold	Repayment rate
Plan 1	£26,900	9% above the threshold
Plan 2	£29,385	9% above the threshold
Plan 4	£33,795	9% above the threshold
Plan 5	£25,000	9% above the threshold
Postgraduate Loan	£21,000	6% above the threshold

These thresholds apply to income earned between 6 April 2026 and 5 April 2027.

The threshold is not the amount you repay. It is the point above which repayments begin.

How Are Plan 5 Repayments Calculated?

Most new undergraduate students funded through Student Finance England are on Plan 5.

Under Plan 5, you repay 9% of the income you earn above £25,000.

You do not repay 9% of your full salary.

Example: Salary of £30,000

The calculation is:

• Annual salary: £30,000

• Repayment threshold: £25,000

• Income above the threshold: £5,000

• 9% of £5,000: £450 per year

• Approximate monthly repayment: £37.50

Example: Salary of £40,000

• Annual salary: £40,000

• Repayment threshold: £25,000

• Income above the threshold: £15,000

• 9% of £15,000: £1,350 per year

• Approximate monthly repayment: £112.50

Approximate Plan 5 repayments

Annual income	Income above £25,000	Approximate monthly repayment
£25,000	£0	£0
£28,000	£3,000	£22.50
£30,000	£5,000	£37.50
£35,000	£10,000	£75
£40,000	£15,000	£112.50
£50,000	£25,000	£187.50

Actual payroll deductions may differ slightly because repayments are calculated using weekly or monthly pay periods and are rounded according to payroll rules.

Read Student Loan Repayments Explained [Student Loan Repayments Explained] for further examples covering every repayment plan.

What Happens If You Earn Below the Threshold?

You do not make compulsory student loan repayments while your income is below the threshold for your plan.

If you were making repayments and your income later falls below the threshold, deductions should stop. They can begin again if your earnings rise.

This could happen if you:

• Reduce your working hours

• Take parental leave

• Change to a lower-paid job

• Lose your job

• Take a career break

• Return to education

The outstanding balance does not become immediately payable simply because you stop working.

What If Your Income Changes Each Month?

Student loan deductions are normally calculated using your pay for each individual pay period.

This means you could have a deduction in a month when overtime, commission or a bonus pushes your pay above the monthly threshold, even if your total annual income eventually remains below the annual threshold.

For Plan 5, the 2026/27 thresholds are approximately:

• £480.76 per week

• £2,083.33 per month

• £25,000 per year

If your total income for the completed tax year was below the annual threshold, you may be able to request a refund of deductions taken during higher-paid weeks or months.

Keep your payslips and P60 in case you need to check or challenge a deduction.

How Are Student Loan Repayments Collected?

If you are employed

Your employer normally deducts student loan repayments through payroll alongside Income Tax and National Insurance.

The deduction should appear on your payslip. You should check that your employer is using the correct repayment plan.

If you are self-employed

Student loan repayments are normally calculated through the Self Assessment system.

The amount due will be based on your relevant income and repayment plan.

If you have more than one job

Repayments are normally assessed separately against the pay from each employment.

You could therefore earn more than the annual threshold across two jobs but make no payroll repayments if neither individual job pays above the relevant weekly or monthly threshold.

Other income included in a Self Assessment return may affect the final calculation.

If you receive both undergraduate and postgraduate loans

You may need to repay an undergraduate student loan and a Postgraduate Loan at the same time.

For example, an eligible borrower could pay:

• 9% above the threshold for their undergraduate plan

• An additional 6% above the Postgraduate Loan threshold

The deductions are calculated separately.

Do Student Loan Repayments Come Out Before or After Tax?

Student loan repayments are calculated using gross income above the relevant threshold.

However, the repayment is deducted from your take-home pay alongside other payroll deductions.

The student loan deduction does not reduce the income on which Income Tax or National Insurance is calculated.

What Happens If You Leave University Early?

Leaving your course does not cancel the money already borrowed.

For full-time students funded through England, the university may receive:

• 25% of the annual Tuition Fee Loan at the start of term one

• A further 25% at the start of term two

• The final 50% at the start of term three

If you leave during the year, you remain responsible for the portion of Tuition Fee Loan already paid. That amount is repaid through the normal income-contingent system.

Maintenance Loan overpayments

Your Maintenance Loan will be reassessed according to how long you remained on the course.

Money covering the period after you left may be treated as an overpayment. Unlike the ordinary loan balance, an overpayment can be requested immediately and is not protected by the normal income threshold.

Contact your university and student finance provider as soon as you decide to suspend or leave. This can reduce the risk of receiving money you are no longer entitled to keep.

What Happens If You Move Abroad?

Moving overseas does not cancel your student loan.

You must update the Student Loans Company if you leave the UK for more than three months. You may be asked to provide evidence of your income and employment status.

Overseas repayment thresholds vary by country and are designed to reflect differences in living costs. The Student Loans Company converts your income into pounds and calculates repayments using the threshold for the country where you live.

If you fail to provide the requested information, you may be charged a fixed repayment amount and could build up arrears.

Update your details again when you return to the UK after more than three months abroad.

When Is a Student Loan Written Off?

A student loan does not necessarily continue for the rest of your life.

Any remaining balance is normally cancelled after the write-off period for your repayment plan.

Repayment plan	Normal write-off period
Plan 1	Depends on when the loan was taken out
Plan 2	30 years after the April you first became due to repay
Plan 4	Usually 30 years for loans first paid on or after 1 August 2007
Plan 5	40 years after the April you first became due to repay
Postgraduate Loan in England or Wales	30 years after the April you first became due to repay

For example, if a Plan 5 borrower first became due to enter repayment in April 2030, any remaining balance would normally be written off 40 years later.

The loan may also be cancelled if the borrower dies. In limited circumstances, the Student Loans Company may cancel a loan when a borrower is permanently unable to work because of illness or disability and meets the relevant conditions.

Will You Repay the Full Student Loan?

That depends on your circumstances.

You are more likely to repay the full balance if you:

• Have a relatively small loan

• Earn substantially above the repayment threshold

• Experience strong salary growth

• Work above the threshold for most of the repayment period

• Make voluntary additional repayments

You are less likely to repay the full balance if you:

• Have a large loan

• Earn close to or below the threshold

• Spend long periods outside paid employment

• Work part-time for significant periods

• Reach the write-off date with a balance remaining

This is why the balance should not be viewed in exactly the same way as a credit card balance. Some borrowers will repay everything, while others will make income-based contributions until the remaining amount is cancelled.

Does a Student Loan Affect Your Credit Score?

Student loans do not normally appear on credit reports and do not directly affect your credit score.

However, this does not mean they have no effect on future borrowing.

A mortgage lender may ask whether you make student loan repayments because the deductions reduce your monthly take-home pay. The lender may include this when assessing how much mortgage borrowing you can afford.

The outstanding balance itself is not normally treated like an unpaid credit card or personal loan on your credit file.

Can You Make Extra Student Loan Repayments?

Yes. You can make voluntary payments towards part or all of your student loan at any time, and there is no early repayment penalty.

However, an additional payment does not normally reduce the compulsory percentage deducted from your salary. It reduces the outstanding balance.

Before overpaying, consider:

• Whether you are likely to repay the balance in full anyway

• How many years remain before the loan is written off

• Your expected future income

• The current interest rate

• Whether you have an emergency fund

• Whether you have more expensive borrowing

• Whether you are saving for housing or other priorities

MoneyHelper advises that borrowers should not normally prioritise student loan overpayments ahead of higher-cost borrowing such as credit cards or overdrafts.

Voluntary payments may make sense for some high-earning borrowers who are likely to clear the full balance. They may provide little financial benefit to someone whose remaining loan would otherwise be written off.

Consider independent financial advice before making a large payment.

Can You Borrow Less Than You Are Offered?

Yes.

You can choose not to take the full Tuition Fee Loan or Maintenance Loan available to you.

However, consider your full university budget before reducing the amount. Borrowing less may leave you dependent on:

• Family contributions

• Savings

• Part-time work

• Commercial overdrafts

• Credit cards

• Private loans

Commercial borrowing can carry higher interest rates and less flexible repayment conditions than government student finance.

Use Cost of Living at University [Cost of Living at University] and Budgeting for Students [Budgeting for Students] to estimate what you will realistically need.

Do You Need to Reapply for Student Loans?

Yes. Undergraduate student finance normally needs to be renewed for each academic year.

Your entitlement can change if:

• Household income changes

• You move in or out of the parental home

• You change course

• You transfer university

• You study abroad

• You repeat a year

• You suspend your studies

• You move from full-time to part-time study

Students should keep their course, contact and bank details updated throughout their studies.

Read How to Apply for Student Finance [How to Apply for Student Finance] for a complete application guide.

Common Myths About Student Loans

“You repay the full loan as soon as you graduate”

You only make compulsory repayments when your income exceeds the threshold for your plan.

“The bigger your balance, the bigger your monthly payment”

Compulsory repayments are based mainly on income, not the outstanding balance.

“Your parents are responsible for repaying it”

The loan belongs to the student, even when parental income is used in the Maintenance Loan assessment.

“You cannot get a mortgage with a student loan”

A student loan does not appear on your credit report. However, repayments can be considered during a lender’s affordability assessment.

“Moving abroad means you stop repaying”

You must update the Student Loans Company if you leave the UK for more than three months. Overseas repayment arrangements may then apply.

“Leaving university cancels the loan”

You remain responsible for eligible Tuition Fee and Maintenance Loan amounts already paid.

“Interest makes everyone’s monthly payment rise”

Interest increases the balance, but compulsory repayments are calculated using income and the rules of your repayment plan.

“Everyone should repay early”

Early repayment can benefit some borrowers, but others may pay money towards a balance that would eventually have been written off.

Student Loan Checklist

Before borrowing:

• Check which student finance organisation you should apply to.

• Confirm that your course is eligible.

• Understand the difference between Tuition Fee and Maintenance Loans.

• Estimate your living costs.

• Research bursaries and scholarships.

• Read the current loan terms and conditions.

While studying:

• Check each payment carefully.

• Keep your contact and bank details updated.

• Tell your funding provider about course changes.

• Avoid spending Maintenance Loan instalments too quickly.

• Reapply for each academic year.

• Report a suspension or withdrawal immediately.

After leaving university:

• Check your repayment plan.

• Review your payslips for deductions.

• Keep your P60s and payslips.

• Claim a refund if eligible.

• Update the Student Loans Company before moving abroad.

• Consider your wider finances before making voluntary repayments.

You may also be able to reduce the amount you need to borrow through Scholarships vs Bursaries [Scholarships vs Bursaries] and Part-Time Jobs at University [Part-Time Jobs at University].

Frequently Asked Questions About Student Loans

Do student loans have to be repaid?

Student loans are repayable, but compulsory repayments are only due when your income exceeds the threshold for your plan. Any balance remaining at the end of the applicable repayment period is normally cancelled.

How much student loan will I repay each month?

The amount depends on your income and repayment plan. A Plan 5 borrower repays 9% of income above £25,000 under the thresholds applying from April 2026.

Do I repay my Tuition Fee Loan and Maintenance Loan separately?

No. They are generally combined into your undergraduate student loan balance and repaid through the same repayment plan.

What happens if I never earn above the threshold?

You will not normally make compulsory repayments while your income remains below the threshold. Any remaining eligible balance may eventually be written off under the rules for your plan.

Does my spouse have to repay my student loan?

No. Your spouse’s income does not make them responsible for your individual student loan.

Can the repayment threshold change?

Yes. Student loan thresholds, interest rates and terms can change. Check the current official guidance rather than relying on figures from the year when you first applied.

What if my employer uses the wrong repayment plan?

Download your active plan type letter from your online student loan account and show it to your employer. You may be able to request a refund if using the wrong plan caused you to overpay.

Can student loan repayments stop?

Yes. Compulsory deductions should stop when your pay falls below the weekly or monthly threshold. They may restart if your income rises again.

Is student loan interest added while I study?

Yes. Interest begins when the first payment is made and continues while you study and after you leave, until the loan is repaid or cancelled.

What if I am paid a large bonus?

A deduction may be taken if the bonus pushes your pay above the threshold for that week or month. You may be able to request a refund after the tax year if your total annual income remained below the annual threshold.

Final Thoughts: How Do Student Loans Work?

The most important thing to remember is that UK student loans are based largely on your future income.

You borrow money for tuition fees and living costs, interest is added to the balance, and repayments begin only when your earnings exceed the threshold for your plan.

For most students, the key questions are not simply:

• “How much will I owe?”

• “How quickly can I clear the balance?”

It is often more useful to ask:

• Which repayment plan will I be on?

• What is the repayment threshold?

• How much will be deducted at different salaries?

• Am I likely to repay the full balance?

• When will any remaining balance be written off?

Understanding these rules makes it easier to make sensible decisions about borrowing, budgeting and university costs.

Continue with Maintenance Loans Explained [Maintenance Loans Explained], Student Loan Repayments Explained [Student Loan Repayments Explained] and How to Apply for Student Finance [How to Apply for Student Finance].