What Happens If You Don't Pay Your Student Loan UK — Complete Guide
What happens if you don't repay your student loan, can't afford it, or ignore SLC. How repayments work, avoiding arrears, self-employed rules, living abroad, and when loans get written off.
·7 min read
Student loans work differently to normal debt — you only repay when earning over the threshold, and the loan is eventually written off. Here’s how it all works and what happens in different scenarios.
How Student Loan Repayment Actually Works
Automatic Repayment (If Employed)
Detail
How It Works
PAYE deduction
Taken automatically from salary
You can’t opt out
Mandatory once over threshold
Employer deducts
Like tax and National Insurance
Shown on payslip
As “Student Loan” deduction
No choice in amount
Fixed percentage of earnings over threshold
Key point: If you’re employed and earning over the threshold, you can’t “not pay” — it’s taken before you receive your salary.
Repayment Thresholds 2025/26
Plan
Annual Threshold
Monthly Threshold
Repayment Rate
Plan 1 (pre-2012)
£24,990
£2,082
9% of earnings over threshold
Plan 2 (2012-2023)
£27,295
£2,274
9% of earnings over threshold
Plan 4 (Scotland)
£31,395
£2,616
9% of earnings over threshold
Plan 5 (from 2023)
£25,000
£2,083
9% of earnings over threshold
Postgraduate Loan
£21,000
£1,750
6% of earnings over threshold
What You Actually Pay
Annual Salary
Plan 2 Annual Repayment
Monthly Repayment
Under £27,295
£0
£0
£30,000
£243
£20
£35,000
£693
£58
£40,000
£1,143
£95
£50,000
£2,043
£170
£60,000
£2,943
£245
£80,000
£4,743
£395
Scenarios Where Problems Arise
Self-Employment
Situation
What Happens
Self-employed, over threshold
Must make repayments via Self Assessment
Don’t include on tax return
SLC will be notified, demand payment
Ignore demands
Interest added, potential legal action
Can’t afford
Contact SLC to discuss — they may consider circumstances
Living Abroad
Situation
Requirement
Leave UK
Must tell SLC within 3 months
Working abroad
Income assessed against UK threshold equivalent
Different currencies
Converted to GBP
Don’t update SLC
Fixed amount may be demanded
Ignore demands
Debt can be pursued internationally
Mixed Income (Employment + Self-Employment)
Situation
How It Works
PAYE job + self-employment
PAYE deductions taken + Self Assessment calculation
May overpay
Can claim refund from SLC
Must declare both
On Self Assessment tax return
What Happens If You Don’t Pay
If You’re Employed
Scenario
What Happens
Employer deducts automatically
Nothing you can do — it’s law
Employer fails to deduct
SLC contacts employer, potential penalties for employer
Wrong amount deducted
Contact SLC for correction/refund
You cannot “not pay” if employed over threshold — it’s taken at source.
If You’re Self-Employed and Don’t Pay
Stage
What Happens
Miss Self Assessment deadline
SLC notified by HMRC
Warning letter
Demanding payment
Interest added
On overdue amount
Repeated non-payment
SLC may take legal action
County court
Debt recovery (rare)
If You Live Abroad and Don’t Pay
Stage
What Happens
Don’t update SLC
Fixed payment demanded
Ignore demands
Arrears accumulate
Persistent avoidance
Debt collection agencies
Return to UK
May face larger balance
Legal action
Possible in some countries
When Loans Get Written Off
Write-Off by Plan Type
Plan
Written Off After
Plan 1 (English/Welsh, pre-2006)
Age 65
Plan 1 (from 2006)
25 years after April after leaving course
Plan 2
30 years after April after leaving course
Plan 4 (Scotland)
30 years or age 65
Plan 5
40 years after April after leaving course
Postgraduate Loan
30 years after April after leaving course
What “Written Off” Means
Aspect
Detail
Balance cleared
Whatever is owed disappears
No payment required
Even if balance still exists
No tax on write-off
Current rules — not treated as income
Automatic
SLC handles it — no action needed from you
Write-Off Estimates
Plan
Typical Write-Off Date
Plan 2, graduated 2020
April 2051
Plan 2, graduated 2023
April 2054
Plan 5, graduated 2026
April 2067
Does Student Loan Affect Credit Score?
Credit Score Impact
Factor
Impact
Appears on credit report?
No
Affects credit score?
No
Affects mortgage applications?
Yes (indirectly)
Affects other borrowing?
Sometimes
How It Affects Mortgages
Factor
How It Matters
Reduces net income
Lenders see lower take-home pay
Affordability calculation
Repayments included in outgoings
Borrowing power reduced
By roughly 10-15% for typical borrower
Not shown as debt
But affects what you can borrow
Example: £50,000 salary borrower with Plan 2 loan might borrow £15,000-£20,000 less than someone without a student loan.
Overpaying Your Student Loan
Should You Overpay?
Factor
Consider
Interest rate
Currently RPI + up to 3% (can be high)
Likely to repay in full?
Most won’t — overpaying may be wasted
Other debts?
Pay high-interest debt first
Other savings goals?
ISA, pension, house deposit may be better
Income trajectory
If earning £60k+ long-term, may repay anyway
When Overpaying Makes Sense
Situation
Recommendation
High earner (£60k+)
Will likely repay — overpaying reduces interest
Small balance remaining
Near end of loan — clear it
Near write-off date
Don’t overpay — let it write off
Lower/average earner
Don’t overpay — unlikely to repay in full anyway
Refunds If You Overpay
Situation
What Happens
Overpaid after balance cleared
SLC refunds automatically
Overpaid near write-off
Cannot reclaim — be careful
PAYE continued after clearing
Contact SLC for refund
Time limit
Must claim within set period
International Rules
Moving Abroad
Requirement
Detail
Tell SLC
Within 3 months of leaving UK
Provide address
Your contact details abroad
Prove income
P60 equivalent or tax return
Currency conversion
Your income converted to GBP
Threshold adjustments
Varies by country (cost of living considered)
Country-Specific Thresholds
Income thresholds are adjusted based on World Bank cost of living data. Examples:
Country
Typical Threshold Adjustment
USA
Higher threshold (higher cost of living)
Australia
Higher threshold
France
Similar to UK
Spain
Lower threshold (lower cost of living)
Thailand
Much lower threshold
If You Don’t Update SLC
Consequence
Detail
Fixed payment demanded
SLC estimates your income
Usually high
They assume worst case
Arrears build up
Interest added
If you return to UK
Will face larger balance
May be recoverable
Even from overseas bank accounts
Special Circumstances
Disability or Long-Term Illness
Situation
What Happens
Unable to work
No repayments if under threshold
Receiving benefits
May qualify for DSA review
Cannot earn due to disability
Contact SLC to discuss
Compassionate consideration
SLC can exercise discretion
Death
Situation
What Happens
Borrower dies
Loan written off
No liability to estate
Family don’t inherit debt
Automatic
SLC notified through HMRC
Bankruptcy
Situation
What Happens
Go bankrupt
Student loan NOT written off
Unlike other debts
Survives bankruptcy
Repayments continue
If earning over threshold
Very rare exception
Court can include in some cases
Common Myths Debunked
Myth vs Reality
Myth
Reality
“I can choose not to repay”
If employed over threshold, deductions are automatic
“Bailiffs can chase student loans”
No — SLC uses different recovery methods
“It affects my credit score”
No — doesn’t appear on credit reports
“I’ll lose my house”
No — can’t secure against property
“It’s written off at 65”
Only some Plan 1 loans — others based on years
“Interest is capped”
Interest can be RPI + 3% (currently very high)
“Overpaying always makes sense”
Most people won’t repay in full — overpaying wastes money