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Repayment of loans and rates of inflation

If you take out a tuition fee loan and a maintenance loan from the UK Government they are bundled together to make one combined loan. Interest starts to accrue on the loan from the day you receive the money. 

You only start to repay your student loan after you graduate and once you are earning over £21,000 per year. You only repay 9 per cent of everything you earn annually above £21,000.

Rates of interest vary throughout the life of the loan, and are currently published as per the below.

While studying
The loan accrues interest at the rate of inflation (as measured by the Retail Price Index) plus 3 per cent. This continues until the first April after graduation after which a progressive taper is applied.

Graduates earning less than £21,000
The loan accrues interest at the rate of RPI inflation.

Graduates earning between £21,000 and  £41,000
The interest rate will gradually rise from RPI to RPI plus 3 per cent the more you earn (the interest rises 0.00015 per cent for every extra pound you earn or, put another way, if you earn £1,000 more you accrue 0.15% extra interest). These thresholds will rise with average earnings from 2017.

Graduates earning over £41,000
The loan accrues interest at the rate of RPI inflation plus 3 per cent.


How to make payments

The loan is repaid through the income tax system if you work in the UK. Student loans do not go on credit files.

The student loan is written off after 30 years.

Graduates are allowed to repay their loans early, if they wish to do so, without a penalty being applied.