There’s a lot of noise about student loans in the news. This often comes from serious folk who use complicated words and rarely crack a smile.
For those who want to understand what on earth is going on (without being bored to death by said serious folk), our fun guide is here to help!
What is a student loan?
A student loan helps cover:
- tuition fees (ie lectures, exams, library access)
- living costs (ie dubious rented accommodation, pesto pasta, cheap pinot grigio)
Most students in England borrow money from the government to help pay for these costs. You only start repaying once you earn above a certain amount, known as a repayment threshold (a word nearly as horrible as “moist”).
The different student loan plans
Student loans in England are divided into different repayment “plans”, inspiringly named after numbers.
Plan 1
Or what we like to call, the Liam Neeson, because it’s the OG and applies if you’re from Northern Ireland. It’s also for those who started university before September 2012 in England or Wales. It will look for you. It will find you. And it will take 9% of your income above £26,065. After 25 years, it will finally give up and get written off…that’s showbusiness!
Plan 2
We call it the Tesla, because it’s expensive and not well liked. It is associated with the introduction of £9k tuition fees and high interest rates, and usually applies if you started uni from September 2012 onwards in England or Wales. You start repaying the Tesla when you earn over £29,385 per year (also at 9%), and it gets written off after 30 years.
Plan 3
Aka the Brian Cox. This one’s for the super-clever postgraduate students doing Masters or doctoral courses. It’s a bit rarer, and doesn’t cause quite so much controversy in the news.
Plan 4
What we fondly refer to as Susan Boyle. It applies to those from Scotland and, like Susan, quietly gets on with things without constantly dominating the headlines. You only start repaying Susan when your income is over £33,795 per year.
Plan 5
We call it King Joffrey because it’s the youngest and not very popular. It only applies to students who started university from August 2023 onwards in England. Unfortunately, this one expects you to start repaying earlier (£25,000) and sticks around for longer, only getting wiped after 40 years. Ruthless behaviour.
How the heck do repayments actually work?
Repayments usually depend on how much you earn, not how much you borrowed. This means two graduates with wildly different student loan balances could still repay the exact same amount each month.
Repayments are normally taken automatically through your payslip, similar to tax and National Insurance. For many people, student loans behave more like an extra graduate tax than a terrifying credit card bill.
Student loans work differently from other forms of borrowing because they do not usually appear on your credit report. However, mortgage lenders may still consider your student loan repayments when deciding how much you can borrow, because those repayments reduce your monthly take-home pay.
What to do next?
Student loans can sound intimidating, but understanding your own plan can make the whole thing feel a lot less overwhelming.
A few simple ways to feel more confident:
- Visit GOV.UK Student Finance to check what plan you’re on and what your balance looks like.
- Next time you get paid, have a quick look at your payslip and see how much is being deducted for your student loan. You might be surprised by how manageable it actually feels month to month.
- Most importantly: don’t panic if your balance looks huge. For many graduates, student loans behave more like an extra graduate tax than a terrifying debt monster lurking under the bed.
And if this blog helped make student loans feel less confusing, you’ll probably enjoy 2mins: the app that turns money topics into fun bite-sized games!
