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If you studied in the UK, you may well be one of the millions of former students with a loan from the Student Loans Company (SLC) that you need to repay.
For those who have a job in the UK, the process is straightforward: so long as your employers have the correct information, the money comes directly out of your paycheck. But things get considerably more complicated if you move overseas.
This article will tell you how UK student loan repayments work if you move away from the UK. The topics that will be covered are:
- What will happen to your student loan when you move abroad
- How much you have to pay back when you’re living and working abroad
- If something happens to your student loan when you’ve been living abroad for 5 years
- How you can repay your student loan when you’re living abroad
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Before you get started, a bit of information about international payments.
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The short answer to this is: not very much. It will still be there, still gaining interest, still awaiting repayment. You may have moved abroad, but you haven’t escaped your debts.
As this article will explain, though, you’ll need to keep on top of the paperwork.
Sadly not. Your student loan won’t be cancelled just because you’re moving overseas. You’ll still have to pay it back.
If you don’t, the penalty is a “fixed monthly payment” that you have to pay instead of the normal monthly repayment amount. It’s likely to be far more than you’d have to pay otherwise¹⁺².
When you’re living and working abroad you have to repay your student loan under the same conditions you would if you lived in the UK: if your salary is above a certain amount. In the UK, that amount is currently £18,935 if you started your course before 1 September 2012 (Plan 1), or £25,725 if you started it afterwards (Plan 2). For postgraduates, the limit is currently £21,000. ³ These amounts are for an annual salary.
As we’ll explain below, if you’re overseas, those figures may be a little different, because of the differing costs of living in countries around the world³.
You may not have to start repaying straight away when you move abroad. Check with an advisor, as you might be allowed a grace period as you sort everything out.
Just like in the UK, the amount you have to pay back is 9% of your earnings, above the repayment threshold mentioned earlier. You have to repay each month.
However, while that threshold is £18,935 (Plan 1) or £25,725 (Plan 2) in the UK, the threshold for the country you’re living in might be different. That’s because the SLC factors in the relative economic strength of each country.
In stronger economies like the USA or France, the figure will be the same as in the UK. In particularly expensive countries it may be higher: in Switzerland, for instance, it’s £26,510 (Plan 1) or £36,015 (Plan 2). On the other hand, if you move to a country where the cost of living is lower, the threshold will be lower as well. If you move to Uganda, for instance, you’ll pay back your loan on earnings above £7,575 (Plan 1) or £10,290 (Plan 2) ¹⁺².
Ignore any rumours to the contrary: nothing special happens after 5 years of living overseas. You still have to pay.
Of course, you may still get your debt written off eventually, but that depends on what sort of loan you have, and not whether you’re living in the UK or overseas. The debt is written off after 25 or 30 years, depending on when you started repaying. Or, if you took the loan before 1 September 2006, it’s written off when you turn 65 ³.
You only have to bother doing this if you’re going abroad for more than 3 months. Otherwise, you’ll still be in the British system and will just pick up where you left off when you return to the UK³.
Here’s a step-by-step guide to how to keep up with your student loan overseas.
It’s a good idea to get in touch with the Student Loans Company before you move abroad and tell them what you’re doing and how they can get in touch with you. The last thing you want is for them to be pursuing you because they think you’re trying to get away without paying.
The key difference with your student loan repayments while you’re abroad is that you repay them directly to the SLC, rather than via your employer and the monthly paycheck. Therefore, the SLC needs to see evidence from you regarding what you earn.
That’s where the Overseas Income Assessment Form comes in. Fill this out with details of your move abroad and your employment situation.
Alongside this form, you’ll need to provide evidence. If you’re going to be employed abroad, they’ll need to see⁴:
- Copies of your last 3 months of payslips, or
- A signed, dated copy of your contract - if you started in that job in the last 6 months.
If you’re self-employed, on the other hand, they’ll want⁴:
- Copies of your financial accounts, as recent as you can, confirming your gross annual income. A pile of invoices isn’t acceptable for this. Or
- A letter from your accountant confirming your gross annual income.
However, if this is still your first year of self-employment, you may well not have either of the above. In that case, they’ll make do with⁴:
- Copies of your bank statements from the last 3 months, showing your name and the funds you use to support yourself, or
- The “Third Party Declaration” on the Overseas Income Assessment Form. If you’re being supported by someone else while living abroad, that person should fill in this section of the form to confirm their financial support.
If you’re not employed, you’ll need to provide documents that prove what you’re doing other than working. This could include⁴:
- Proof of government benefits you’ve received within the last year
- Proof of support by a third party - fill in the form, as detailed above
- Proof that you have enough savings to live on
- Proof that you’re travelling, plus proof you can support yourself while doing so
- A letter from the company you’re volunteering with, confirming that they’re supporting you
- A letter from your place of further study, confirming you’ll be studying there. Or they can complete the Third Party Declaration.
It may be more or less straightforward for you to provide the requested documentation. Just try and satisfy all the conditions they ask for: so long as you’re sincerely trying to tell them what your income is, you should get there eventually.
It might take a while, but once the SLC are satisfied, the system should work like clockwork: they’ll take the money from your account each month, and just send you the occasional friendly reminder that you are tens of thousands of pounds in debt.
However, they’ll probably ask you to confirm your income every year. So be on the lookout for post from the SLC as they request an update on your situation. You can even apply for a reassessment yourself, if your income level changes significantly⁵.
On the Overseas Income Assessment Form, you’ll see that the SLC ask for your UK bank details. That’s so they can set up a Direct Debit, which is the easiest way for you to pay, as the money will come directly out of your account via a regular repayment schedule. There’s a catch, though: having to repay by direct debit, means you’ll need to use a UK bank account. Potentially not the ideal solution if you’re now earning money abroad, as this means you’ll have to pay fees to make an international payment and your money has to be exchanged back to British pounds.
The trick is just to make sure you have a steady stream of money flowing back into your UK account, even though you’re living and earning overseas. Wise could be the ideal solution here: it lets you make an international transfer at the real mid-market rate, and with only low, clearly stated fees each time.
Wise is a great way to save that little bit extra when you’re sending money back home. After all, when you’re still thousands upon thousands of pounds in debt from your student days, every little helps...
Sources used for this article:
1.Student loan repayment - Overseas thresholds Plan 1
2.Student loan repayment - Overseas thresholds Plan 2
3.Student loans - SLC guide to terms and conditions, 2019/2020 (page 7 + 13)
4.Evidence information sheet - Overseas Resident
5.Student loan, repaying from overseas
*All sources checked on June 5, 2019
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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