UK Student Loans: Don't Pay Until You Earn! Your Guide to the New Rules

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Millions of students are preparing to start university this September, and while the prospect of gaining new skills and making new friends is exciting, the cost of higher education is a major concern. The "rough cost" of a three-year course, including tuition, books, and living expenses, can be substantial. In England and Wales, tuition fees have risen to a cap of £9,535 this year.

However, this is not an upfront cost. Instead, most students rely on a student loan system that is often misunderstood. It doesn't work like a typical bank loan; rather, it functions more like a graduate tax, where your repayments are directly tied to your income—not the amount you borrowed. The most important thing to remember is that you don't have to repay your loan until you're earning above a certain threshold.

What is a Student Loan?

A student loan is split into two parts:

Tuition Fee Loan: This covers the annual cost of your course and is paid directly to your university.

Maintenance Loan: This optional loan is paid directly to your bank account in three installments to help with living costs such as rent, food, and travel. Unlike the tuition fee loan, the amount you receive is means-tested, based on your household income and whether you're studying in London. The maximum maintenance loan for students living at home is £8,877, increasing to £10,544 for students studying outside London and £13,762 for those in London.

You can apply for one or both loans, and they are then combined into a single debt to be repaid after you finish your studies.

Who Can Get a Loan and How to Apply

To be eligible, you must be a UK national or have settled status and be enrolled in a recognised college or university. Student finance is generally only available for your first undergraduate degree. There's no age limit for the tuition fee loan, but maintenance loan funding may be limited if you are over 60.

You must apply through the specific student finance body for your country:

England: Student Finance England

Scotland: Student Awards Agency for Scotland (SAAS)

Wales: Student Finance Wales

Northern Ireland: Student Finance NI

You can apply up to nine months after your course starts, but applying later might affect the amount of money you get.

When Do You Start Repaying?

This is the most critical part of the system. You only start repaying from the April after you finish or leave your course, and only once your income is above a specific threshold. These repayments are automatically deducted from your salary through your employer's payroll, similar to income tax.

There are five different repayment plans, and which one you're on depends on when you started your course. Each has a different repayment threshold for the 2025/26 tax year.

Plan 1 (pre-2012): You repay 9% of everything you earn over £26,065 a year.

Plan 2 (2012-2023): You repay 9% of everything you earn over £28,470 a year.

Plan 4 (Scottish loans): You repay 9% of everything you earn over £32,745 a year.

Postgraduate Loan: You repay 6% of everything you earn over £21,000 a year.

Plan 5 (new students from August 2023): You repay 9% of everything you earn over £25,000 a year.

If you earn less than your plan's threshold, you don't pay anything back. If your income drops below the threshold, your repayments will automatically stop.

The Truth About Interest and Repayment

While interest is charged on your loan from the moment it's paid out, the amount you repay is still based on your income, not the total debt. This means many graduates may never repay the full amount they borrowed. Under the new Plan 5, the interest rate is set at the Retail Price Index (RPI) rate, which is currently 3.2%. This is a significant change from previous plans, which had higher, more complex interest rates.

Another key feature is that student loans do not affect your credit score. However, lenders may consider your student loan repayments when assessing your affordability for other loans, like a mortgage.

Finally, student debt is not a lifelong burden. The loan is automatically wiped out after 40 years (or after 30 years for those on Plan 2), or if you die or are permanently incapacitated. This "graduate tax" model ensures that higher education is financially accessible and that repayments remain manageable throughout your working life.

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