Student Loan Glossary
Plain English definitions of all the key student loan terms. Click any letter to jump to that section.
A
Affordability Assessment
The calculation lenders use to determine how much you can borrow for a mortgage. Student loan repayments are factored in as a committed expense, reducing your borrowing capacity.
→ Mortgages GuideAnnual Threshold
The yearly income level above which you start making student loan repayments. Each loan plan has a different threshold.
→ Thresholds GuideB
Bank of England Base Rate
The interest rate set by the Bank of England. Plan 1 and Plan 4 loan interest is capped at this rate plus 1%.
Balance
The total amount you owe on your student loan, including the original amount borrowed plus any accrued interest.
C
CPI (Consumer Price Index)
A measure of inflation used for some government statistics. Not currently used for student loan calculations (RPI is used instead).
Combined Repayment
If you have both undergraduate and postgraduate loans, you repay 9% + 6% = 15% of income above the respective thresholds.
→ Combined CalculatorCredit Score
A numerical representation of your creditworthiness. Student loans do NOT appear on your credit report and don't affect your credit score.
D
Deduction
The amount taken from your salary for student loan repayment. Appears as a separate line on your payslip.
→ Tax Codes GuideDirect Debit
A payment method where SLC can automatically collect repayments from your bank account. Used for overseas borrowers or voluntary overpayments.
E
Effective Interest Rate
The real cost of your loan considering your repayments and eventual write-off. For many borrowers, the "effective" rate is lower than the stated rate because they won't repay in full.
Enhanced Maternity Pay
Employer-provided maternity pay above the statutory minimum. If it keeps you above the threshold, student loan deductions continue.
→ Maternity GuideG
Graduate Tax
An informal term for how student loans function in practice, a 9% tax on earnings above the threshold that eventually ends (at write-off).
Gross Pay
Your total salary before any deductions (tax, NI, student loan, pension). Student loan repayments are calculated on gross pay.
H
HMRC
Her Majesty's Revenue and Customs. The government department that collects student loan repayments via PAYE and Self Assessment, then passes them to SLC.
I
Income Contingent
A type of loan where repayments depend on your income, not a fixed amount. All UK student loans since 1998 are income contingent.
Interest Rate
The percentage charged on your loan balance annually. Varies by plan type and, for Plan 2, by income level.
→ Interest GuideK
KIT Days (Keeping in Touch Days)
Up to 10 days you can work during maternity/adoption leave without affecting statutory pay. Earnings count towards your student loan threshold.
L
Loan Balance
The total amount outstanding on your student loan at any given time, including principal and accrued interest.
LTV (Loan to Value)
The ratio of your mortgage to the property value. Lower LTV = better mortgage rates. Student loans don't directly affect LTV.
M
Maintenance Loan
Money borrowed for living costs during university. Part of your total student loan balance.
Marginal Rate
For Plan 2, the additional interest rate above RPI based on your income. Ranges from 0% (at threshold) to 3% (at £51,245+).
Monthly Threshold
The monthly income above which repayments are made. Calculated by dividing the annual threshold by 12.
N
Net Pay
Your take-home pay after all deductions including tax, NI, student loan, and pension contributions.
NI (National Insurance)
A separate tax on earnings that contributes to state benefits. Student loan repayments are in addition to NI.
O
Overseas Income Assessment
The form you complete when living abroad to calculate your student loan repayments based on local income and thresholds.
→ Moving Abroad GuideOverpayment
Making voluntary payments above your required monthly amount. Only beneficial if you'll repay in full before write-off.
→ Overpaying GuideP
P60
Annual certificate from your employer showing total pay and deductions for the tax year, including student loan repayments.
PAYE (Pay As You Earn)
The system by which employers deduct tax, NI, and student loan from your salary before paying you.
Payment Holiday
Not available for UK student loans. Repayments automatically pause if you earn below threshold, but you can't request a break.
Plan 1
Student loan type for English/Welsh students who started before September 2012, and all Northern Ireland students.
→ Plan 1 DetailsPlan 2
Student loan type for English/Welsh students who started between September 2012 and July 2023.
→ Plan 2 DetailsPlan 5
Student loan type for English students starting from August 2023. Features lower interest but longer write-off (40 years).
→ Plan 5 DetailsPostgraduate Loan
Separate loan for Master's or Doctoral study. Repaid at 6% above £21,000 threshold, alongside any undergraduate loan.
→ Postgrad DetailsR
Repayment Period
The maximum time you'll make repayments before the loan is written off (25-40 years depending on plan).
Repayment Rate
The percentage of income above threshold you pay. 9% for undergraduate loans, 6% for postgraduate.
RPI (Retail Price Index)
A measure of inflation used to set student loan interest rates. Generally higher than CPI.
S
Salary Sacrifice
An arrangement where you give up part of your salary for benefits (usually pension). Reduces your gross pay, lowering student loan repayments.
→ Salary Sacrifice GuideSelf Assessment
The annual tax return process for self-employed people. Student loan repayments are calculated and paid through Self Assessment.
→ Self-Employment GuideSLC (Student Loans Company)
The government-owned company that administers student loans in the UK. They manage applications, balances, and work with HMRC on collections.
SMP (Statutory Maternity Pay)
The legal minimum maternity pay employers must provide. Usually well below the student loan threshold.
Start Notice (SL1)
The electronic notification from HMRC to your employer instructing them to start deducting student loan repayments.
Starter Checklist
Form completed when starting a new job where you declare student loan status. Replaced the P46.
Stop Notice
The notification from SLC/HMRC to your employer when your loan is paid off, instructing them to stop deductions.
T
Tax Code
The code used by HMRC to tell employers how much tax to deduct. Student loans are NOT part of your tax code, they're a separate deduction.
Threshold
The income level above which you start repaying. Each plan has different annual, monthly, and weekly thresholds.
→ Thresholds GuideThreshold Freeze
When the government keeps thresholds at the same level rather than increasing with inflation. Plan 2 and Plan 5 thresholds are currently frozen.
Tuition Fee Loan
Money borrowed to pay university fees directly. Combined with maintenance loan to form your total student loan balance.
U
Underpayment
When you've paid less than you should (e.g., multiple jobs). Settled through Self Assessment at year-end.
W
Write-off
The automatic cancellation of any remaining loan balance after a set period (25-40 years depending on plan). No tax is due on written-off amounts.
Write-off Date
The specific date your loan will be cancelled, counted from the April after you left your course.
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