All students love their student loans until the time comes when they have to pay them back. If you don’t know what repayments you’ll be making to your student loan company when it comes time to make them, it can be very challenging. In order to understand the difference between student loan repayment plans, it doesn’t need to be a complicated process.
Almost every student would be unable to go to university if there wasn’t a student loan available to them. Despite the fact that it’s common to blow through it fairly quickly, it’s a lifesaver for thousands of people. Most students understand that at some point they will have to pay back student loans, however, they may not be aware of the different repayment plans that are available. Depending on where you live and when you started your course, it will vary from person to person.
The Difference Between Student Loan Repayment Plans
In total, there are four different repayment plans available: Plan 1, Plan 2, Plan 4, and the Postgraduate Loan. There is no way for you to choose what payment plan you will be on, but it does have an impact on how much you will need to repay.
Student loan Plan 1 or 2?
There is a significant difference between the first two plans and that is when you started your course. It is most likely that you will be on Plan 1 if you are an English or Welsh student who started your undergraduate course anywhere in the UK before the first of September 2012.
There is also a possibility that you will be on Plan 1 if you are a Northern Irish student who has started an undergraduate or postgraduate degree course on or after 1 September 1998.
If you are an EU student studying in England or Wales, then you are on Plan 1 if you started your course on or after 1 September 1998, but before 1 September 2012 if you started your course after that date. In Northern Ireland, it is determined only if you started studying on or after the 1st of September 1998 if you are studying there.
Students from England, Wales, and the rest of the EU who started their studies outside of Scotland and Northern Ireland on or after 1 September 2012 are eligible to use Plan 2. In addition, it is also applicable if you have taken out an Advanced Learner Loan on or after 1 August 2013 and if you have taken out a Higher Education Short Course Loan on or after 1 September 2022.
Student Loan Plan 4
In order to qualify for this plan, you must be a Scottish student or an EU student studying in Scotland. As of 1 September 1998, if you started an undergraduate or postgraduate course on or after that date, you will be on Plan 4.
Compared to the other ones, this one is even more simple. In order to qualify for this loan, you must be an English or Welsh student who has applied for a Postgraduate Master’s loan on or after 1 August 2016. In the event that you took out a Postgraduate Doctoral loan on or after 1 August 2018, this is also what you will do.
As of 1 August 2016, the Postgraduate Plan will also be applicable to EU students who have started a postgraduate course on or after that date.
When Do You Start Paying Back Your Student Loan?
It is only when your income exceeds the threshold on your repayment plan that you will start paying back the loan. It is common for the threshold to change every year on 6 April.
Unless you are studying part-time or pursuing a postgraduate degree, the earliest date that you will start making payments back on your student loan is the April following the end of your course, or the April four years after the course started if the course is longer than four years (part-time study, postgraduate doctoral).
- As part of Plan 1, you will begin repaying your loan when your income reaches £388 a week, £1682 a month, or £20,195 a year.
- Using the second plan, you will start repaying the loan as soon as your income reaches £524 per week, £2274 per month, or £27,295 per year.
- This is Plan 4: You will be starting to pay back the loan as soon as your income reaches £487 a week, £2114 a month, or £25,375 a year.
- In the case of a postgraduate loan, you will have to start repaying when your income reaches £403 a week, £1750 a month, or £21,000 a year.
It should be noted that all of this is before tax and other deductions are applied to your income.
How Much Will You Repay?
The repayment plan you’re on will also have a direct impact on how much you can afford. Plans 1, 2 and 4 require you to repay 9% of your income over the threshold if you earn over that amount. In the case of those who took out a Postgraduate Loan, this amount is 6%. The interest on your student loan is also something that you should take note of as soon as you receive your first payment on your loan.
Accordingly, if you are on Plan 2 and your annual income is $28,800, then you would receive £2400 per month if you were on Plan 2. It is important to note that if you earn £126 over the monthly threshold, you will have to pay back 9% of that amount each month. It would then equate to an average of £11 per month if we did this.
In case you would like to see a more detailed example, you can visit the Student Loan Repayment Calculator and enter the figures that apply to your situation.