Student Loan system overhaul to benefit millions of students and graduates

25.02.2020
Shaun Davison

The Government have announced that a new online service will enable graduates to easily keep track of their student loan accounts, as part of improvements to the student loan repayment system.

A new online repayment service is expected to be introduced later this year and will allow graduates to see and manage more up to date information about their student loan balance.

The service is part of improvements to modernise the Student Loans Company (SLC) repayment system, with the intention to replace the annual paper statements.

How Student Loans work


Currently if you are a graduate, you are required to start paying back your student loan from the April after you leave your course (or if you have studied part-time, the April 4 years after the course started).

Repayments only start once you earn over the annual student loan threshold.

From 6 April 2020, the threshold is increasing to £26,575 a year (Plan 2). For graduates with pre-2012 (Plan 1) loans, repayments start once you earn over the annual student loan threshold of £19,390 a year.

Student Loan deductions are calculated at 9% for both Plan 1 and Plan 2 loans.

The Postgraduate Loan (PGL) threshold will remain the same at £21,000, with the additional deductions being calculated at 6%. If you have a Plan 1/Plan 2 loan, together with a PGL, you will repay 15% of the amount you earn over the threshold.

If you are an employee, repayments are calculated by your employer and deducted from your salary at the same time as tax and National Insurance.

If you complete a self-assessment tax return, you should include your loan information on your return and your repayments will be calculated by HM Revenue & Customs (HMRC) when this is prepared. You will also need to include any student loan deductions taken by your employer through PAYE.

Useful tips

1) If you think you have overpaid your student loan, you may be able to apply for a refund.

This would be in circumstances where:
- you have paid more than the total amount you owe
- your annual income was below the student loan threshold
- you started making repayments before you needed to

2) If you are self-employed, you may have additional student loan contributions to make with your usual self-assessment tax liabilities. It is important to budget for this and save for the repayments.

3) If you are close to paying off your student loan, you may wish to switch to a direct debit
scheme to ensure you do not overpay your student loan.

If you wish to discuss any of the aspects

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