What Happens If You Don’t Pay Your Student Loans Back In The UK

10 Dec 2021, by Evie Howarth, min. read

Find out what happens if you don’t pay your student loans back in the UK. No matter what plan you’re on.

Repaying student loans in the UK is a legal obligation once you earn over the threshold. It’s understandable if the thought of repaying student loans worries you a little, but we’re here to put those to rest.

Here’s everything you need to know about repaying your student loans and what happens if you don’t.

Do you ever fully pay your loan back?

There’s a very high percentage of those who never pay back their student loans. According to Money Saving Expert, lower earners won’t be able to pay back their loans, if at all. Whereas those earning above the threshold of £27,295 never manage to pay it back within the 30 years they have to do so.

How many students pay off all their debt?

According to UK Government and Commons Library statistics, they expect only 25% of current full-time undergrads to pay their loans back in full.

How do you pay back your loan?

If you’re on a full-time course

You will repay your student loans the April after you finish or leave your course. This is only if you’re earning over the repayment threshold.

So if you’re earning less than £27,295, you won’t have to worry about repaying your student loan.

If you’re on a part-time course

You won’t have to repay your loans until April four years after the start of your course, or the April after you leave or finish your course. Whichever is the soonest?

If you do not pay your loans back after 30 years, then your loans will be canceled.

Read: 31 Online Jobs For Students in the UK.

How much are the repayments?

The rate of your repayments depends on which student loan plan you’re on. Plan 1, 2, 4 or Postgraduate Loans. The repayment plans are all predetermined, meaning you cannot choose the rate or how your repayments are done.

Plan 1

You’re either an English or Welsh student who started an undergraduate course in the UK before 1st September 2021
You’re a Northern Irish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
You’re an EU student who started an undergraduate course in England or Wales on or after 1 September 1998, but before 1 September 2012
You’re EU student who started an undergraduate or post-grad course in Northern Ireland on or after 1 September 1998.

Plan 2

You’re an English or Welsh student who started an undergraduate course anywhere in the UK on or after 1 September 2012
You’re an EU student who started an undergraduate course in England or Wales on or after 1 September 2012
You took out an Advanced Learner Loan on or after 1 August 2013.

Plan 4

You’re a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
You’re an EU student who started an undergraduate or postgraduate course in Scotland on or after 1 September 1998.

Postgraduate Loan plans

You’re an English or Welsh student who took out a Postgraduate Master’s Loan on or after 1 August 2016
You’re an English or Welsh student who took out a Postgraduate Doctoral Loan on or after 1 August 2018
You’re an EU student who started a postgraduate course on or after 1 August 2016.

Student loan repayment plans

According to the government website, for each plan you’ll repay:

9% of the amount you earn over the threshold for plans 1, 2 and 4
6% of the amount you earn over the threshold for the Postgraduate Loan.

When do you start paying it back?

How you’ll repay your student loans depends on what you choose to do and how much you earn after your course.

You do not pay anything back if your income is under the threshold. But keep in mind that interest starts being added to your loan when you begin repaying from your first payment.

If you enter employment

You won’t have to do anything. Your employer will automatically take 9% of your income above the threshold from your salary, along with tax and National Insurance.

If you’re self-employed

You’ll need to make repayments at the same time as you pay tax through self-assessment.

If you move overseas

You’ll need to repay directly to the Student Loans Company, instead of having it taken automatically from your pay.

The rate you pay will be different overseas though. Find out more about paying loans overseas on the government website.

Read: Should You Study Abroad?

The student loan thresholds

What’s the threshold for Student Loan Plan 1?

£382 a week or £1,657 a month (before tax and other deductions).

What’s the threshold for Student Loan Plan 2?

£524 a week or £2,274 a month (before tax and other deductions). They change every tax year on 6 April.

What’s the threshold for Student Loan Plan 4?

£480 a week or £2,083 a month (before tax and other deductions).

Repaying Plan 1 and 2 loans

You’ll repay 9% of your income over the Plan 1 threshold, but if your income is under the Plan 2 threshold (£524 a week or £2,274 a month), your repayments only go towards your Plan 1 loan.

If your income is over the Plan 2 threshold, your repayments go towards both loans.

How much interest do I pay on my student loans?

The amount of interest you pay depends on your plan. Fortunately, student loan interests are updated on the government website.

Repaying Plan 4 loan and Plan 1 loan

You’ll repay 9% of your income over the Plan 1 threshold (£382 a week or £1,657 a month). But if your income is under the Plan 4 threshold (£480 a week or £2,083 a month), your repayments only go towards your Plan 1 loan.

If your income is over the Plan 4 threshold, your repayments go towards both loans.

Repaying Plan 4 loan and Plan 2 loan

You’ll repay 9% of your income over the Plan 4 threshold (£480 a week or £2,083 a month). But if your income is under the Plan 2 threshold (£524 a week or £2,274 a month), your repayments only go towards your Plan 4 loan.

If your income is over the Plan 2 threshold, your repayments go towards both loans.

Can a change in finances affect repaying student loans?

It’s important you update your financial situation on the government website. You don’t need to worry too much about it though if you’re still below the threshold (assuming you haven’t been repaying your loans to begin with). You’ll also need to provide updates if you stop working or are leaving the UK for more than 3 months.

If you keep missing payments, the Student Loans Company may take legal action against you. It’ll also affect your credit rating.

Is it worth paying it back early if you can?

When it comes to whether paying your student loans off is worth it, the rules (or rather unspoken rules) are rather different.

You should pay off any debt as early as possible. However, by paying any loan off early (and above your means), you risk needing to borrow money further down the line.

You’re relatively safe if for whatever reason your income drops too, because you may not have to repay it when it falls below the threshold. Plus…

Does a student loan affect your credit score?

Your student debt doesn’t appear on your credit report!

And since it doesn’t show up, it can’t affect your credit score. In some cases though, if you plan on taking out a mortgage, lenders may ask you what your student loans are as part of an affordability check.

The exception is people who took out student loans and have had problems repaying i.e missed payments.

Can a student loan be passed on?

Loans cannot be passed on to someone else. Even if you pass away. You can however seek help from trusted friends or family to help with student loan repayments. We don’t really recommend this though, as this could be counterintuitive.

Can student loans be cancelled?

Only in very extreme circumstances. This includes:

The death of the student
Inability to work due to severe illness or disability.

In both cases, evidence will need to be supplied e.g. a death certificate or doctor’s note for the latter.

So, what happens if you don’t pay your student loans back?

We know most students won’t repay their student loans back.

But the longer it’s left unpaid, the higher the interest racks up. Typically, people don’t notice their student loan repayment leave their account because it’s quite minuscule compared to tax.

All in all, if you don’t repay them after 30 years (or sadly, you pass on), your student debt will be wiped for good.