WellTax Blog

Student loans in the UK: how it works

July 9, 2022

If you start working as a freelancer, you are classified as a ‘Sole Trader’. This means that you are classified as self-employed, even if you have not yet notified HMRC.

Dividends are counted as income when assessing the student loan repayment threshold. This means that if the total income exceeds the repayment threshold, the student is obliged to repay the student loan.

This includes repayment of tuition fee loans, maintenance loans and postgraduate loans. Other student loans, e.g., grants and subsidies, do not have to be repaid unless overpaid. The way the loan is repaid depends on whether the student is employed or self-employed. Loan repayment will depend on the repayment plan chosen. There are four plans (Plan 1, Plan 2, Plan 4, Postgraduate Loan). It is important to remember that student loans must be repaid even if you leave the course early.

If you are a Plan 1 student, you are an English or Welsh national who started an undergraduate course at any UK university on or after 1 September 2012; an EU student who started an undergraduate or postgraduate course in England or Wales on or after 1 September 2012; or a Northern Irish (anywhere in the UK for them) or EU student who enrolled on an undergraduate or postgraduate course in Northern Ireland on or after 1 September 1998.

Plan 2 is for English or Welsh students who commenced an undergraduate course on or after 1 September 2012 anywhere in the UK; or an EU student who commenced an undergraduate course in England or Wales on or after 1 September 2012. A student is in Plan 2 if they obtained an Advanced Learner Loan on or after 1 August 2013 or a Higher Education Short Course Loan on or after 1 September 2022.

A student is in Plan 4 if they are a Scottish student enrolled on an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998 or an EU student who commenced an undergraduate or postgraduate course at a Scottish university after 1 September 1998.

A student is eligible for the Postgraduate Loan if they are from England or Wales and have taken out a Postgraduate Master’s Loan on or after 1 August 2016, a Postgraduate Doctoral Loan on or after 1 August 2018 or an EU student who started a postgraduate course on or after 1 August 2016. 

Your student loan will only be repaid when the student’s income exceeds the threshold stipulated in the repayment plan. It is important to mention that the thresholds change on 6 April each year. The earliest date to start repaying the loan is April following the end of the course or April 4 years after the start of the course if the course is longer than 4 years, e.g., if you are studying part-time or pursuing a postgraduate doctorate.

Reimbursement stops automatically if you stop working and your income falls below the threshold.

Domenico Santomasi

Photo by Vasily Koloda on Unsplash

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