Student Loans repayment – ways to repay

Getting a student loan, for most, is an essential part of getting through university.  Whether for course fees, accommodation or simply entertaining, it can be an expensive business studying.  Furthermore, the thought of actually paying back the loan is something that usually is less of a consideration.

However, once graduated and you start earning above a certain threshold, your loan repayments will start.

As an employee, the payments are automatically deducted from your salary each month and paid over to the Student Loans Company, via HMRC.

However, as a director, it’s slightly more complicated.  As your salary alone (if on a minimum wage) will not usually exceed the threshold, all other forms of income are considered such as any dividends you withdraw from your company.  The calculation is declared on your self-assessment and paid each year via your normal tax liability payment.

Student loan repayment thresholds

If you commenced your course after 1 September 2012 in England or Wales, you’ll have a Plan 2 loan and your earning threshold before you need to pay back your loan is £25,000.

However, if your course started before 1 September 2012, or you have a loan from the student finance agencies in Northern Ireland or Scotland, you’ll have a Plan 1 loan that you’ll start paying back when you earn over £18,330.

You will need to confirm which plan applies, when preparing your self-assessment calculation.

Mortgage Style Loan

Between 1 September 2017 and 31 August 2018 the threshold for mortgage style loans will be £29,219.

If you have a mortgage style loan, please see here for further information.

Postgraduate Loan

Postgraduate Loans will not commence repayments until 6 April 2019. The repayment threshold will still be £21,000 a year. Postgraduate Loans will be repaid in addition to undergraduate Plan 1 or Plan 2 loans.

Final Year of Student Loan repayment.

In the final year of repayment, the full repayment calculation amount will be declared on your tax return. However, only the actual outstanding balance will be paid with any personal tax liability you may have.  Your dedicated accountant will explain in more detail and confirm the exact amount to be paid.

How to get additional help.

If you are ensure of your current position, you can log into your online account here or contact the Student Loans Company. Further information can be found here.

Posted by David Crossley

Senior accountant and SME specialist