Different types of student loan
Topic: Different types of student loan
Student Loans are part of the Government’s financial support package for students in higher education in the UK. They are available to help students meet their living costs while they are studying.
There are two main types of student loan.
- Fixed – term repayment loans (old – style loans). These loans were available to students commencing a course of higher education up to and including the academic year 1997-98 and are often known as ‘fixed – term repayment’ or ‘mortgage – style’ loans. Repayments are made directly to the Student Loans Company (SLC).
- Income – Contingent Loans (new – style loans). These loans replaced the fixed – term repayment loans and became available to students commencing a course of higher education from the academic year 1998-99. It is HMRC’s responsibility to collect repayments where the borrower is working in the UK. The SLC is responsible for collecting the loans of borrowers outside the UK tax system. There is an annual threshold below which repayments are not due. If the borrower’s income is above the threshold, repayments will be made according to the level of income. There are two main types of loan known as ‘Plan 1’ and ‘Plan 2’. Repayments are deducted at a rate of 9% of income over the threshold, although each plan has a different threshold.
In April 2019, a new loan for England and Wales known as Postgraduate Loan (PGL) was introduced. There are separate thresholds and rates for these loans.
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