The loan system
Tuition fees in England are currently up to £9,250 per year. The vast majority of students take out a Student Loan Company loan to cover these fees, paying nothing upfront. Maintenance loans are also available to cover living costs, scaled by household income. The total debt on graduation for a three-year course in England typically exceeds £40,000-£50,000.
How repayments work
Repayments are income-contingent. Graduates repay 9% of annual earnings above a threshold (currently £25,000) through the payroll, deducted automatically like tax. This means someone earning £30,000 repays 9% of £5,000 = £450 per year, or £37.50 per month. Someone earning £24,000 repays nothing, regardless of their debt balance.
What most graduates actually pay
Interest accrues on the loan balance at RPI plus up to 3%. Most graduates will not repay the full loan — the balance, including accrued interest, is written off after 40 years. The independent Institute for Fiscal Studies estimates that only higher-earning graduates will clear their debt in full. For most graduates, the system functions more like an additional marginal income tax than a conventional loan.
The implications
The write-off mechanism means that students from lower-income backgrounds who go on to lower-earning careers effectively pay less than the sticker price — counter-intuitively, the system is progressive in its long-run outcomes despite the large nominal debt. The main practical impact is on monthly cashflow during repayment years, which is modest for most graduates relative to income.
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