Student loans in the UK help students cover both their tuition fees and living or maintenance costs. This blog will guide students studying in the UK with a student loan, whether enrolled for an undergraduate or a postgraduate course. You could also enroll in a Higher Education Short Course or even a course on Initial Teacher Training. We’ll cover important topics like understanding your loan agreement, the roles of SLC, HMRC, and your employer, and what you need to do as you repay your loan.
Understanding Your Student Loans Contract
People taking a student loan in the UK need to comply with the regulations for repayment of student loans. These regulations are pre-decided and apply when the repayment schedule starts. Be informed that regulations can change at different times.
Your loan contract is managed by the Secretary of State for Education in England. The Student Loans Company Limited (SLC), a non-profit government organization, acts as the official agent on their behalf.
Knowing the Responsibilities of SLC, HMRC, and Your Employer
- Student Loans Company (SLC)
The Student Loans Company is responsible for paying student loans for students in the United Kingdom. The SLC is answerable for all loan-related queries and collects repayments from repayers abroad. SLC also manages your account, adds interest, refunds overpayments, and applies repayments from the UK Tax System.
- HM Revenue and Customs (HMRC)
His Majesty Revenue and Customs (HMRC) is responsible for collecting student loan repayment from employers via the UK Tax System. For self-employes, the repayment happens through Self Assessment.
- Your Employer
The responsibility of the employer is to collect the student loan repayment from your salary on behalf of HMRC, along with tax and National Insurance. You should clear all your queries and doubts from your employer related to repayment of student loans.
- Sharing information
While the HRMC can share repayment details with the SLC, it will not provide any confidential information related to the students’ tax arrangements to the SLC.
It should be noted that neither HMRC nor your employer will have access to any information about your student loan, like interest rates for student loans. They only have basic information, such as that you have taken a student loan and the applicable repayment threshold.
Knowing Your responsibilities
- Provide accurate and complete information.
You need to provide the correct information when applying for a student loan, as this will help HMRC collect repayments on the due date.
The SLC must be informed about changes pertaining to details at different times—while applying, while you are studying at the college/university, or during the loan term (i.e., until the loan is fully repaid).
If the information offered is inaccurate or outdated, a penalty charge could apply. You might also be required to repay the loan, plus the interest and penalties, in one go.
For students who have a Plan 2 loan, it is crucial to stay in touch with the SLC. If they are not in touch or informed of the changes to their details, they will be penalized at RPI plus 3% on the loan, irrespective of the income the individual earns.
Other details that you need to let the SLC know are –
- Name change, phone number change, or bank details change.
- Change in building society account where the funds are transferred.
- Course, college, or university change
- Receive a healthcare award, bursary, or a scholarship
- Address change
- Change in the start or end dates of the course
- Changes in terms of being expelled, leaving, or not starting the course.
- Absenteeism from the course for 60 days or more due to illness or other reasons.
- Getting married.
- Leaving the country.
- Employment status change (for example, change from employed to self-employed)
The National Insurance Number (NINO) must be provided during the application, except for students who don’t have NINO. However, the details must be updated once you apply for one. SLC will check with the Department for Work and Pensions for the NINO details to avoid illegal applications.
HMRC requires these details to repay student loans. Students can contact 0300 200 3500, the National Insurance Helpline number, in case they have lost or lost NINO.
When you start working, the repayment amount must be reflected on your salary slip. It is best to keep a record of your repayments.
Students who take the loan from SLC before they are 18 years old will need to ‘ratify’ the agreement after they turn 18. ‘Ratify’ means that a formal declaration of the loan agreement is executed. If this process is not completed, the student loan will not be available when you turn 18.
Student Loans – Should You Pay Them Back?
- You need to repay your loan.
You are obligated to repay your loan as per the loan contract and agreement. The repayment is collected via the UK Tax System. Employers deduct the amount from your salary per the Pay as You Earn (PAYE) system. For self-employed personnel taking a self-assessment, the repayment will be through Self-Assessment during the time you pay tax. If you stay overseas, your loan repayment will be directly to SLC.
- Loan liabilities
Liabilities, in this case, mean any amount paid to the student or the university/college is added to the loan balance. You are obligated to start the repayment once your course is finished. The repayment includes the amount and the accrued interest.
Undergraduates in part-time courses and students doing their Postgraduate Master’s may be required to start repayment of student loans earlier, even before they finish the course. Irrespective of whether the student has completed the course or got the qualifications, the loan needs to be repaid by the borrower.
- Maintenance Loans
In this case, the funds are transferred to the student directly when the term starts. The student needs to repay every installment received by them.
- Postgraduate Master’s Loan & Postgraduate Doctoral Loan
These loans are also paid directly to the student before each term begins, and the borrower is liable to pay each installment received by them.
- Tuition Fee Loans
For full-time students, the tuition fee loan is paid to the university/college once they confirm their attendance on the course. The student is then liable to repay a percentage of the fee charged at the beginning of every term and repay the entire amount once you start working.
For part-time students, the tuition fee loan is paid to the university/college once they confirm their attendance at the course. Part-time students are liable to repay a percentage of the fee after they have attended the course for 2 weeks. Once the loan has been paid, the student is liable for student loan repayment.
The liability for future installments follows a schedule as listed below. This liability remains even if the student withdraws from the course, suspends their studies, or takes a transfer to another course/university.
| Time of Liability | Amount of Liability |
| Beginning of Term 1 | 25% of tuition fee |
| Beginning of Term 2 | 50% of tuition fee |
| Beginning of Term 3 | 100% of tuition fee |
Students on an HE Short Course can also take a student loan in the UK. These students start their liability after finishing two weeks of the course. The college/university needs to confirm the attendance on the course. Once they confirm their attendance on the course, the tuition fee loan is paid to the university/college. After payment, the student is liable for the repayment of the loan.
- Grant & loan overpayment
Your student loan funds are transferred at the beginning of each term. If the loan amount is reassessed or reduced, an overpayment can occur, in which the loan or grant is more than your entitlement.
For example, if you are eligible for a £6,000 Maintenance Loan for three terms, at the start of each term, you will receive £2,000. If you leave the course after Term 2, it means that you should be getting the money for Term 3. If the money gets transferred, it means you are overpaid and have to return it.
The repayment, in this case, has to be separate. It also has to be done before you repay the loan balance. So, an overpayment of a loan or grant happens when money is paid over and above your entitlement due to a change in circumstances. Such overpayments can be recovered from future funds granted to the student. The SLC is legally authorized by government regulations to recover overpayment of loans and grants, underscoring the importance of being aware of your financial situation to avoid such situations.
Conclusion
To summarize, student loans in the UK help students manage their higher education costs without difficulty—the basics of the different types of student loans, including Tuition Fee Loans and Maintenance Loans. Repayment of student loans starts only when the student is employed, and their income crosses a preset threshold at attractive interest rates for student loans. It is crucial to stay updated on all aspects of student loans so that you can confidently make the right choice and financial decisions. Getting guidance from experienced accountants like TaxCan and Cangaf Accountants can help you get the student loan with ease while handling all the legal intricacies.
