Know All About Student Loan Plan 1 And Plan 2

Student Loan

A student loan is a type of loan specifically for students for helps them pay for their higher studies. Student loan mainly consists of tuition fees and maintenance fees.

The tuition fee loan specifically covers the cost you need to complete your education. So, the loan-providing companies directly pay your education provider.

On the other hand, a maintenance loan covers any cost you might need to complete your education such as buying books and supplies, maybe your living costs if you move away from your home.

What are the latest changes in student loans in the UK?

The student loan interest has been creeping up from 4.1 % to 4.4% in January 2022 for those students who have started their course in or after 2012. On April 6, the UK govt. froze the threshold for plan 2. This means more people will have to start the repayment sooner.

What each individual will actually pay actually varies in terms of interest. Because it depends on whether you are still studying and what you earn.

The government cut the student loan rate of interest this summer in response to the soaring inflation. The education department declared that the maximum rate of student loan in England and Wales is capped at 6.3 percent from September. It was due to be capped at 7.3 percent; the ministers intervened in June to reduce the rate of interest from 12 percent otherwise it would have reached due to rising inflation. But in the light of other costs, it was decided to cut them again.

Where can I get a student loan?

In the UK, all student loans are approved and managed by the Student loan company, you need to apply on the student finance section on the website of the UK (gov.uk).

Students Loans Company is a UK government-owned organization that administers and approve the student loan of the students of colleges and Universities.

How much money can you get with a student loan?

For the tuition loan, you can get the full amount of your course which is up to £9,250. Whereas the maintenance loan depends on the household income, so it varies from person to person.

A student who is eligible for a student fiancé will be able to get an amount maintenance loan regardless of their financial condition.  A student coming from a low-income household will get a higher maintenance loan compared to a student coming from a higher-income household.

Suppose, a student whose household income is £25,000 or less, staying at home can get a maintenance loan of £7,987 but if he stays away from home then the maintenance loan will be £9488.

On the other hand, a student whose household income is £70,000, staying at home, can get £3,516 but if he stays away from his home then the maintenance loan could be £4,422.

What is a student loan repayment plan?

It is estimated that student loan is a fast-growing type of loan for individuals who are not able to afford their education. Students may graduate with a significant amount of debt, but for many, the loan will be exempted before they pay it back.

The Student finance system differs throughout the UK, tuition fees are approx. £9,000 a year. For most of the Scottish students studying at Scottish, considering their living costs, the tuition fees are free. 
Students start to repay their loans when their income hits a certain amount. On the 6th of April, each year the repayment amounts are changed for the borrowers. There are two types of the loan repayment plan. These are called plan 1 and plan 2 but the borrowers do have not the opportunity to pick one plan that suits them as it depends on the year their course started.

What are the different student loan repayment plans?

The different student loan repayment plans vary from person to person. Different repayment plans depending on which year you have started your education and what the government policy was there at that time. Here is a list of different loan repayment plans in the UK:

Plan 1: If you started University before September 2012 then you will be on plan 1 loan repayment plan. This covers English and Welsh students, who started their undergraduate course anywhere in the UK before September 2012, and the Northern Irish and Scotland students who started their undergraduate and postgraduate anywhere in the UK from September 1998.

Here, the repayments start when the annual income hits £19,380 and payment is 9 percent of anything above this threshold.

Plan 2: This Plan is applicable to English or Welsh students who started their education after September 2012 anywhere in the UK. Repay will start when your income hits £26,568 a year. Payment is 9 percent on anything above this threshold. The loan also ensures interest while students are still in the university. At that moment, the rate is 5.6 percent. After completing the curse, the rate will depend on total income across a tax year.

Know student loan plan 1 or 2, which one is for you?

The type of student loan is known as the Income Contingent Loan.  The amount you will pay back depends on your income and you will pay it back through the tax system. There are two types of loan repayment plans –plan 1 and plan 2. Which one you are proceeding with will define when you start repayments and the amount how much you pay.

Plan 1 is for the students of England and Wales, who started their education before September 2012. Also includes all the students living in Scotland and Northern Ireland.

Plan 2 is for the students of England and Wales, who started their education on or after September 2012.

How and when do I pay back my plan 1 student loan?

  • You will start repaying your loan in April after finishing or leaving your course.
  • You can make your repayments only when your income is over the current UK repaying threshold that is£352 a week, £1,527 a month, or £18,330 a year.
  • If in case your income falls below the repayment threshold, repayments will be stopped at that moment and restart again when your income is over £18,330.
  • In the following years, the threshold will be rated.
  • You can make additional voluntary repayments at any time to SLC.

Your monthly payments on student loans will be based on your annual income before tax. If your income whether it may the form of salary, dividends, or investments, is over the threshold for paying back the loans then you are due to repay.

To find out what the threshold you are on, check the below chart:

Plan 1:

Annual salaryAmount of repayment
0-£19,8940% of the income
£19,895-£20,9999% of the income
£21,00-£27,2949% of the income
£27,295+9% of the income

If you are over the threshold for plan 1, you will pay that percentage on however much your income goes above that threshold.

How and when do I pay back my plan 2 student loan?

  • If you are a full-time student then you will be eligible to repay your loans in April after completing or leaving your education.
  • If you are a part-time student, you will be n to start to repay your loans in April after you complete your course, or April comes four years after the date you have started your course, whichever comes first.
  • You can start to repay your loans only when your income is above the current UK threshold which is £25,000 a year, £2,083 a month, or £480 a week.
  • If in case your income falls below the repayment threshold then repayments will be stopped immediately and restart again when your income will be over the threshold.
  • You can also make additional voluntary repayments at any time to SLC.

For plan 2, if you are studying, the interest rate is 4.5%. If you are an employee then the rate depends on your income in the current tax year. To find out what the threshold you are on, check the below chart:

Plan 2:

Annual incomeAmount of repayment

If you have more than one job in a year, then the interest rate will be based on the combined income from both jobs.

How does a student loan work?

You will start repaying your loan as soon as you start working and earning enough.  You will due to repay your loan through the tax system.

The issuing student loan company will inform HMRC to notify your employer when you start working. The payments will be automatically deducted from your taxable salary.

Once you have repaid your loans then HMRC will notify your employer and the deduction will be stopped. If there are any payments that slip through before your employer is refunded.


When will my student loan be written off?

Ans: For plan 1, if the student loan was taken out 2005-2006 or earlier and you are a resident of England, Northern Ireland, or Wales then at the age of 65 your student loan will be written off. For plan 2 there is no option for your loan to be written off. But there are some circumstances in which a student loan is written off such as if the person is no longer to be able to work due to illness then your loan may be written off. Another condition in which the loan would be written off if the student died.

What happens if I move abroad?

Ans: Student loan doesn’t get written off if you move abroad. Some students believe that if they escape overseas, they may slip through the crack of student loan collection. But it is a misconception.

If you work in abroad, check the student loan company repayment thresholds in different countries. If you are a UK student loan debt then you have to fill out an Overseas Income Assessment Form to repay the loan.

Will my student loan impact my credit score?

Ans: Unlike many other forms of credit and loans, your student loan will not affect your credit score. Irregular repayments may make a big red mark on your credit rating and you should aware of this fact.

How much interest is calculated?

Ans: The interest rate is set on September 1 of each year; it is fixed based on the retail price index of the previous march. While you are still studying the interest rate is 4.5%, made up of the Retail Price index plus up to 3%. But when you are employed it depends on your income in the current tax year. The interest rate changes every year depending on the RPI.

How can I find out how much student debt I have remaining?

Ans: Sign in to your student loan repayment account to check your balance. To sign- in you will need:

  1. Customer reference number or email id
  2. Password
  3. Any secret answer

If you are unable to sign in then you can reset by using the email address that you have given at the time of applying for the loan. Otherwise, you may contact SLC for any help.


Based on the information provided in this content, it is possible that people are acknowledged about the effects of student debt are largely generalized.  The findings will be helpful to the policymakers who desire to protect themselves from the negative effects of debt in their life. They will be able to implement some financial prospects in their life by understanding the effects of student loans on higher education in the UK. This note gives a background of student loans, repayment procedures, and factors that affect takeaway.

Whether you are concerned about the influence of your student loan on your future financial prospects or want to start planning for big milestones such as buying a house, it’s always advisable to speak to a financial expert.

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