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Scottish student loan repayments

Is it better to save or pay it off?

Amy Roberts
Amy Roberts | Edited by Hannah McEwen
Updated 20 August 2024

In April 2021 Scotland introduced its own student loan repayment plan, separate from the rest of the UK, to replace its existing plan 1 loans. This easy-to-follow guide is for Scottish students who started uni since September 1998 and have a plan 4 loan with the Student Awards Agency Scotland (SAAS).

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In this guide

1-minute read on repaying student loans in Scotland

Repaying student loans in Scotland at a glance:

Who has them? Any Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998. Or, if you're not Scottish, see our other repayment guides:

  • Plan 1: For students who went to uni in England and Wales and started before August 2012 and Northern Ireland since 1998.
  • Plan 2: For students who went to uni in England and Wales since September 2012.
  • Pre-1998: For students who went to uni in England and Wales between 1990 and 1997.

What's the current interest rate and how is it set? The interest rate is the LOWER of either the Bank of England base rate, plus 1%, or the rate of inflation. The current interest rate is 6.25%. Full info.

How repayment works. You repay 9% of everything earned above £31,395 a year - though more accurately it's 9% of anything over £2,616 per month. So earn £31,000 and you'll repay nothing; earn £35,000 and it's £324.45 a year. Full info.

Should you overpay? In short, no. If you've got other debts they're likely costing you more so repay them first and if you're debt free you'd likely be better off saving the money instead. Full info.

All Scottish graduates are now on plan 4 – here's what that means

Any Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998 who has taken out student finance with the Student Awards Agency Scotland (SAAS) will have a plan 4 student loan. 

For the academic year 2024/25 you repay 9% of everything earned above £31,395 a year - though more accurately it's 9% of anything over £2,616 per month. So earn £31,000 and you'll repay nothing; earn £35,000 and it's £324.45 a year.

The threshold usually increases every April with the amount you repay varying depending on what you earn. If your income drops (or stops), so too do your repayments.

If you earn under the threshold for the year, but a bonus or overtime earnings pushes you over the £2,616 monthly limit, a repayment WILL be deducted that month. You can claim it back from the SLC at the end of the tax year if your P60 shows total earnings were under £31,395.

It's not possible to defer repayments if you're earning over the repayment threshold.

Interest rates on Plan 4 loans

The interest rate is the LOWER of the following:

Either: The Bank of England base rate, plus 1%...

Or: The rate of inflation. This is fixed for a year on 1 September based on the Retail Prices Index (RPI) measure from the previous March, though the actual rate is only officially confirmed each August.

March 2023's inflation rate was 13.5%, which is more than the Bank of England base rate (5.25%) plus 1%. So the current interest rate is 6.25%. If you're new to interest rates, see our Interest rates beginner's guide.

  • Click here to see the current and previous student loan interest rates

    Interest rates on plan 4 (Scotland post-1998) student loans

    DATE RATE
    From 20 October 2022 3.25%
    1 September 2022 to 19 October 2022 2.75%
    3 March 2022 to 31 August 2022 1.5%
    13 January 2022 to 2 March 2022 1.25%
    6 April 2020 to 12 January 2022 1.1%
    1 September 2018 to 5 April 2020 1.75%
    1 December 2017 to 31 August 2018 1.5%
    1 September 2016 to 30 November 2017 1.25%
    1 September 2016 to 31 August 2017 1.25%
    1 September 2015 to 31 August 2016 0.9%
    1 September 2014 to 31 August 2015 1.5%
    1 September 2013 to 31 August 2014 1.5%
    1 September 2012 to 31 August 2013 1.5%
    1 September 2011 to 31 August 2012 1.5%
    1 September 2010 to 31 August 2011 1.5%
    1 September 2009 to 31 August 2010 0.0%
    6 March 2009 to 31 August 2009 1.5%
    6 February 2009 to 5 March 2009 2.0%
    9 January 2009 to 5 February 2009 2.5%
    5 December 2008 to 8 January 2009 3.0%
    1 September 2008 to 4 December 2008 3.8%
    1 September 2007 to 31 August 2008 4.8%
    1 September 2006 to 31 August 2007 2.4%
    1 September 2005 to 31 August 2006 3.2%
    1 September 2004 to 31 August 2005 2.6%
    1 September 2003 to 31 August 2004 3.1%
    1 September 2002 to 31 August 2003 1.3%
    1 September 2001 to 31 August 2002 2.3%
    1 September 2000 to 31 August 2001 2.6%
    1 September 1999 to 31 August 2000 2.1%
    1 September 1998 to 31 August 1999 3.5%

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How your student loan is repaid

Even though you apply for your student finance through SAAS, your repayments are collected by the Student Loan Company (SLC).

If you're employed

If you're employed, your repayments will be taken automatically from your pay each month, in the same way as tax and national insurance. If you're earning over the £31,395 a year threshold and repayments aren't being deducted, you must tell your employer as soon as possible and keep a record of this, otherwise you could be fined for non-repayment.

HMRC collects your repayments on behalf of the SLC and then notifies SLC every week so your balance is up to date. You can check your repayments and outstanding loan balance by logging into your online account.

If you're self-employed

If you're self-employed, you'll need to submit an annual self-assessment tax return. HM Revenue and Customs (HMRC) will work out how much you owe from your tax return (still based on 9% of earnings over £31,395) and you'll need to pay this at the same time as you pay your tax, rather than paying it monthly, as employees do. So make sure you budget this into your savings so you don't get a nasty surprise when you submit and pay your tax bill.

Any additional income you have from savings interest, pensions, shares or dividends, will also be treated as part of your income for repayment purposes if over £2,000, and you'll also need to repay 9% of that - again via self-assessment.

If you move abroad

If you live and work abroad for three months or more, you'll need to contact the Student Loans Company (SLC). You'll need to pay 9% of the amount you earn over the relevant threshold for the country you're living in. You can make one-off or recurring card payments using an international debit card or set up a direct debit.

SLC has different thresholds for other countries. The amount you pay may be more or less than you normally pay in the UK.

If you've nearly paid off your loan

If you've nearly paid off your loan give the SLC a call on 0300 100 0611 – or it may continue taking payments past the point that you've cleared the debt.

When you've less than two years left of loan repayments, you have the option to stop repayments via the PAYE scheme and make monthly repayments by direct debit instead. You can do this either by logging into your SLC account or by calling the SLC.

If you haven't switched to direct debit by the time you've 12 months left of your loan repayments, the SLC will write to you to let you know and encourage you to set up a direct debit. For full details on this, and how to get money back if you've already overpaid, read our guide on Student loan overpayments guide.

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The loan gets wiped after 30(ish) years so you may not have to pay it back

The good news is that all student loans have an expiry date. For most plan 4 students, this is after 30 years – though the exact end date depends on when you took out your loan.

When will my plan 4 loan be written off?

Higher education start date Age at which loan is wiped Death Unfit to work
2006-2007, or earlier When you reach age 65, or 30 years from the April you graduated, whichever is sooner
2007-2008, or later
 30 years from the first April after graduation (when you were first due to repay)

It's also important to note your student debt is written off if you die (or become permanently unfit to work), meaning it won't be passed on to your next of kin to repay. This is not the case for other forms of debts.

The fixed length of a student loan is well worth thinking about when considering voluntary repayments. If it's unlikely you'll clear the loan before it 'expires', or if you die or become incapacitated in that time, you'll have unnecessarily repaid debt that you didn't need to. While hopefully this is unlikely for most, it's worth considering.

Why most shouldn't pay off their Scottish student loans early

This section of the guide is worth reading if you've got a plan 4 loan and some savings and you're confident you'll pay off the loan in full before it gets wiped. 

Even if you do have some savings and are considering putting it towards paying off your student loan early, there's some golden rules when it comes to having multiple debts.

Always focus on paying off the highest interest rate debts first.

The reason for this is simple. The higher the interest, the quicker the debt grows, so you want to get rid of it as soon as possible (see the Pay off debts with savings and Should I pay off my mortgage? guides for a full explanation).

With student loan interest rates at 6.25%, it's unlikely most other debts – whether credit cards, loans or hire purchase – are costing you less, so always pay those off before even contemplating touching your student loan.

There can be exceptions to this. For example, there are usually early repayment charges for overpaying your mortgage or repaying it early. Check out our guide on overpaying your mortgage vs saving.

Do savings beat overpaying? 

And if you're debt-free (other than your student loan), consider putting any extra cash you've got into savings, rather than paying off your student loan. This is especially true if the interest you could earn on savings is higher than the interest charged on your student loan.

The top savings accounts are paying up to 5% right now - so you currently wouldn't earn more than you'd save by repaying your plan 4 loan, given your student loan interest is 6.25%.

Plus, consider the fact that if you do pay off the loan early, you could actually risk having to borrow at a higher rate in the future as student loans don't cost anywhere near as much as commercial interest

Do student loans affect my credit score?

No. Income-contingent student loans aren't included on your credit report. But when applying for a product, such as a mortgage, you may be asked whether you have loans. Plus your student loans repayments will reduce your take-home pay so this may be taken into account when applying for borrowings (see the Credit rating guide too).

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