University tuition fees were first introduced in the UK in 1998. The fees started at £1,000 per year before rising to £3,000 and then £9,000. Tuition fees are currently capped at £9,250 per year.
Since the advent of tuition fees, most students have been required to take out loans to cover the costs of university courses and their living costs while they study and don't earn a regular salary. Your student loan amount will depend on where you study and your parent or carer's income.
Student loans charge interest that accrues over time. However, you don't start paying back your loan until you earn over a certain threshold, and your repayments are relative to your income. After a certain period of time, your student loan is written off.
We are going to look at student loans and find out when each of the different loan plans gets written off.
Depending on the student loan plan you are on, your student debt will be written off in either 25 or 30 years or by the time you reach 65. If you are able to, you can choose to pay off your debt in full before then, or you will make monthly payments directly relative to your income to gradually pay it off.
Your student loan may also be written off if you are deemed permanently unfit for work and have the requisite evidence to prove it. We will explore this in greater detail later.
In the UK, there are four types of student loan plans:
- Plan 1
- Plan 2
- Plan 4
Each repayment plan has a threshold for your weekly or monthly income before you start paying back your student loan.
- 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
The interest rate of student loans also varies between the different plans.
Plan 1 loan
Your Plan 1 gets written off:
- When you are 65 if you began your course in the academic year 2005/06 or earlier.
- 25 years after the first April you were due to repay if you began your course in the academic year 2006/07 or later.
You are on Plan 1 if you are:
- an English or Welsh student who started an undergraduate course in the UK before 1 September 2012
- a Northern Irish student who started an undergraduate or postgraduate course in the UK on or after 1 September 1998
- an EU student who started an undergraduate course in England or Wales on or after 1 September 1998 and before 1 September 2012
- an EU student who started an undergraduate or postgraduate course in Northern Ireland on or after 1 September 1998
Plan 2 loan
Your Plan 2 loan gets written off:
- 30 years after the first April you were due to repay.
You are on Plan 2 if you are:
- an English or Welsh student who started an undergraduate course in the UK on or after 1 September 2012
- an EU student who started an undergraduate course in England or Wales on or after 1 September 2012
Plan 4 loan
Your Plan 4 loan gets written off:
- When you are 65 OR 30 years after the first April you were due to repay (whichever comes first) if you started your course in the academic year 2006/07 or earlier.
- 30 years after the first April you were due to repay if you started your course in the academic year 2007 to 2008 or later.
You are on Plan 4 if you are:
- a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
- an EU student who started an undergraduate or postgraduate course in Scotland on or after 1 September 1998
Your Postgraduate loan gets written off:
- 30 years after the first April you were due to repay if you are a student from England or Wales.
Postgraduate students from Northern Ireland are on Plan 1. Postgraduate students from Scotland are on Plan 4.
You are on a Postgraduate Loan repayment plan if you are:
- an English or Welsh student who took out a Postgraduate Master’s Loan on or after 1 August 2016
- an English or Welsh student who took out a Postgraduate Doctoral Loan on or after 1 August 2018
- an EU student who started a postgraduate course on or after 1 August 2016
Your loan will be written off if you are judged to be permanently unfit to work due to an illness or disability. Your loan is also written off in the event of your death.
If you qualify for any of the following disability benefits, you may be able to have your student loan written off:
- Personal Independence Payments
- Disability Living Allowance
- Industrial Injuries Benefit
- Severe Disablement Allowance
You will need to write to the Student Loans Company, requesting for your loan to be canceled and include the following evidence of your disability:
- a letter from a doctor that says you are permanently unfit for work dated from the last six months.
- a letter from the benefits agency that shows you get a disability-related benefit. It must be the most recent letter you have received from them.
If you cannot send the request to the Students Loan Company because of your condition, you can ask a third party to do it. However, they will need Power of Attorney for their request to be acknowledged.
The interest rates on student loans are subject to change. However, the interest rate change will not change your monthly repayments as that is based on your income rather than your debt.
The interest rate on student loans changes with the Retail Price Index (RPI) and the Bank of England base rate.
If you have a Plan 1 or a Plan 4 loan, the interest rate is set by whichever is lowest between:
- The RPI rate from March of that same year
- The Bank of England base rate plus one percent
If you have a Plan 2 or a Postgraduate Plan loan, the interest rate varies depending on whether you have graduated or are still studying. If you are:
- Still studying, the interest on your loan is the RPI plus three percent.
- Graduated, the interest on your loan is the RPI if you earn £27,295 or less, or RPI plus between zero and three percent if you earn more than £27,295. The percentage rises in line with your earnings and is capped at three percent once you earn more than £49,130.
However, as the RPI inflation rate is expected to top 12% in 2022, the interest rates on Plan 2 and 3 student loans have been capped at 6.3% as of September 2022.
Should I pay back my student loan early?
Some people write off student loans themselves by paying their debt back early.
Paying your student loan back early can be a good idea if you earn a high salary or receive a windfall payment, as it stops the interest from accruing over the years. However, you should also remember that because the loans get written off after a certain period, you may never pay back the loan in full if you stick to a regular repayment plan, especially if you earn a low or middle-income salary.
Is a student loan viewed the same as other debts (e.g. credit card debt)?
Student loans are not the same as other debts as you only start paying them off once you earn over the threshold and your repayments are relative to your income. They also differ in that they do not affect your credit rating or hinder you from getting another loan or mortgage.
However, a student loan is still a debt that you are legally obliged to make monthly repayments towards once you earn enough to do so.
Do you pay back your maintenance loan and your tuition fee loan at the same time?
When you are studying, your tuition fee loan goes straight to the university, while your maintenance loan goes directly into your bank account. However, when you have graduated and are paying back your loan, you repay the tuition fee and maintenance loan together.
Can you receive another student loan while paying off your first one?
You can receive a Postgraduate Loan or a Postdoctoral Funding Loan while still paying off your undergraduate loan. However, you usually cannot receive two of the same loans if one is still in debt.
For example, if you funded your undergraduate degree with a loan, you would not be able to fund another undergraduate degree by taking out an additional loan until the original debt was paid off.
Student loans get written off after either 25 or 30 years or when you get to 65, depending on which loan plan you are on. Student loan repayments are relative to your income, so if you earn a high salary or have received a windfall payment, it might be worth paying off your debt early, as student loan interest rates can be quite high.