Student loans: the thresholds, when you start paying, and how to avoid penalties

Exactly when repayments start, how much comes out of each payslip, and the simple habits that stop overpayments and penalties.

A graduation cap beside a rising staircase of coins and a calendar

Know your number6 min readGraduates, students about to finish, and parents helping someone work out what they actually owe.

The short answer

You only repay once you earn over a set threshold, and only a slice of what is above it.
Repayments come out of your pay automatically, like a tax. Below the threshold, you pay nothing.
Most penalties come from silence: wrong plan at a new job, moving abroad without telling anyone, or ignoring a letter.

UK repayment rate

Only on income above your plan's threshold

UK lowest threshold

£25,000

Plan 5, frozen for now

Australia threshold

$56,156

For 2025/26, repaid through your tax return

Only if you want the detail

United Kingdom: which plan are you on

Your plan depends on where and when you studied, and it changes your threshold by thousands of pounds. Check your plan before anything else, it is on your Student Loans Company account.

United Kingdom: what you actually pay, with an example

On Plan 2 earning £35,000, you pay 9% of £6,530, which is about £49 a month. Earning £28,000, below the threshold, you pay nothing at all.

United States: how federal repayment works

There is no income threshold like the UK. Standard repayment starts about six months after you leave college and spreads the balance over ten years.

Australia: HELP and the indexation trick

Repayments start once your income passes $56,156 in 2025/26, collected through your tax return at 1% to 10% of your whole income depending on the band.

How people get fined or overcharged, and how not to

Almost every penalty story is one of these.

Should you pay it off early

In the UK and Australia, usually no. The loan has no effect on your credit file, may be written off, and spare cash often works harder in a pension or tax free wrapper.

What people get told, and what is true

Student loan repayments are based on how much I borrowed.

In the UK and Australia they are based on what you earn, not what you owe. A bigger balance never means a bigger monthly payment.

If I ignore the letters the loan goes away.

Silence is the expensive option. UK borrowers abroad get penalties, and US default lets the government take wages and tax refunds.

Paying it off early always saves money.

UK and Australian loans can be written off and never touch your credit rating. The same cash in a pension or ISA often wins.

Now do it on your numbers

Reading is the easy half. The saving comes from applying this to your income, your country and this tax year, with the deadline written down.

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Where this comes from

General guidance, not personal advice. Anything involving a company, a trust or another country should be checked by a qualified accountant or tax adviser before you act.