A student loan can allow someone to attend university or college, when they would not have been able to do so at all. However, it’s important that you understand how to pay it back once you need to.
You only start to pay your student loan back when your wages go above a certain level (often referred to as a ‘threshold’), so when you first graduate, it’s easy to forget about having the loan if you’re below that threshold and on a lower income. However, not keeping up with your loan repayments when you’re supposed to can end up causing you some serious money issues.
When do I need to start paying back my loan?
Depending on the type of loan you have, you won’t have to make any payments to your student loan until you’re above the payment threshold for your specific student loan plan. At that point, it varies:
▪️If you have a Plan One loan, you’ll start paying this back as soon as you start earning more than £19,390 in a year.
▪️If you have a Plan Two loan, your repayments will start as soon as you start earning more than £26,575 in a year.
Usually, your payments will come straight from your wage through the PAYE system or by self-assessment if you’re self-employed.
It’s also important to keep in mind that even if your yearly wages are below the level mentioned, however your weekly or monthly wages push you above the threshold every so often, you might find that an occasional payment to your loan is deducted from your wage slip.
What if I don't pay it back?
Not paying back your student loan will cause you serious consequences.
When taking out a student loan, you have agreed, by law, to pay it back to the Student Loans Company. They have the right to accelerate your debt, which means that they are allowed to get a court order for any outstanding debt to be paid in one go, including interest.
This often causes the balance to become completely unaffordable and, since the payments are taken straight from your wages, it can leave you short for all your other expenses.