Income

Student Loan Deductions: How They Impact Your Take-Home Pay

#Understanding Student Loan Deductions

If you took out a student loan in the UK, you’ll start paying it back once your income reaches a certain threshold. Repayments are automatically deducted from your salary, so understanding how they affect your take-home pay is essential for good financial planning.

#When Do You Start Repaying?

Your repayments begin once your earnings exceed the threshold set for your specific plan. The amount you repay depends on which repayment plan you’re on. The main plans are:

  • Plan 1: For students from England or Wales who started before 2012. Repayments start once you earn over £22,015 per year (2025/26).
  • Plan 2: For students from England or Wales who started from 2012 onwards. Repayments start once you earn over £27,295 per year (2025/26).
  • Plan 4: For Scottish students. Repayments start once you earn over £27,660 per year (2025/26).
  • Plan 5: For new students from September 2023 onwards. Repayments start once you earn over £25,000 per year (2025/26).
  • Postgraduate Loan (PGL): Repayments start once you earn over £21,000 per year (2025/26).

#How Are Repayments Calculated?

Once your salary exceeds the relevant threshold, you’ll pay a percentage of your earnings above that limit:

  • Plan 1: 9% of earnings above £22,015
  • Plan 2: 9% of earnings above £27,295
  • Plan 4: 9% of earnings above £27,660
  • Plan 5: 9% of earnings above £25,000
  • PGL: 6% of earnings above £21,000

#Example Calculation

If you’re on Plan 2 and earn £30,000 per year:

  • Income above threshold: £30,000 - £27,295 = £2,705
  • Repayment: 9% of £2,705 = £243.45 per year (or around £20.29 per month)

#Multiple Student Loans

If you have more than one type of loan (e.g., a Plan 2 and a Postgraduate Loan), repayments are calculated separately and deducted concurrently. For instance:

  • Plan 2: 9% of earnings above £27,295
  • PGL: 6% of earnings above £21,000

#Impact on Your Payslip

Student loan deductions will appear as a separate item on your payslip. It’s important to keep track of these payments, as overpayments can sometimes occur if your income fluctuates throughout the year.

#Managing Your Repayments

To ensure you’re not overpaying, regularly check your payslips and update the Student Loans Company (SLC) if your financial situation changes. Also, keep an eye on your total loan balance to know when repayments will end.