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Student loan debt. What to do if you're in arrears

In order to enter into full-time education, most people need to take out a student loan to cover tuition fees, accomodation and living costs. While they aren't necessarily a problem during the actual study, they can become a problem when the time comes to pay them back. 

If you're struggling with a student loan from your time studying we can help you maintain a budget so you can keep on track of things while you pay the loan off.

Need help managing your student loan debt payments?

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The difference between old style loans and new style loans

You may have heard student loans being described as either 'old style' or 'new style'. What category your student loan falls under is determined by when your course began:

If your course started before 1998, yours is an old-style loan, also known as a mortgage-style loan. This kind of loan is registered under the Consumer Credit Act (CCA). Old style loans are repayable over five years, or seven years if the original course lasted more than three years. 

Any student loan taken out after 1998 is a new style loan, also known as income-contingent loans. This type of loan is deducted at source from your wages as monthly installments once you start to earn above a certain threshold. 

How do I defer a student loan?

If you have an old-style student loan...

Repayment on your student loan can be deferred if your income is below a threshold. For example, the threshold for deferral from 1 September 2015 to 31 August 2016 was £28,828 gross per annum, or £2,403 gross per month.

Deferment forms are available from February and must be returned by April of each year. You can download them from the Erudio website.

If you qualify for deferment as a result of a change in the repayment threshold, contact the company handling the debt to apply. Interest will continue to be added to the loan balance when it has been deferred.

If the loan is deferred, you won't need to make any payments for the next 12 months.

If you have a new style student loan...

Your loan payment is automatically deferred each year if you're earning below the threshold for that year.

Payments on new style loans start once you cross the threshold, and you won't be able to negotiate lower monthly payments. However, all loans taken out in the UK and Northern Ireland after 1 September 2012 will have any remaining balance written off 30 years after the first repayment was due.

Any balance left to pay on an income-contingent loan taken out before 1 September 2012 will be written off in the following circumstances:

  • England, Wales & Northern Ireland – Loans taken out before 1 September 2006 end when you reaches 65. Loans taken out after 1 September 2006 end 25 years after the first repayment was due
  • Scotland – Loans taken out before 1 September 2007 end when you reach 65. Loans taken out after 1 September 2007 end 35 years after the first repayment was due

I'm struggling now that my student loan is being taken from my wage

While we can't ask the student loan lender to reduce your payments, we can help you review your budget to help you stay on top of all your other expenses. By doing this, you may find things easier to manage.

You might also want to consider a debt solution for any unsecured personal debts such as loans, credit cards and overdrafts

Our online advice tool Debt Remedy can help you put together a personal action plan on your debts in around 20 minutes. Alternatively, you can talk through your budget with one of our friendly advisors. 

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