How unemployment affects student loan repayments, interest accumulation, and long-term debt growth
If you're unemployed or earning below £25,000, you make zero student loan repayments. But interest continues accruing at RPI. Extended unemployment means your balance grows despite making no payments. Under Plan 5's 40-year write-off, this often doesn't matter—most moderate earners never repay fully anyway.
Earning below £25k or unemployed: £0 monthly repayment. HMRC automatically stops deductions when you're not earning. You don't need to inform Student Finance—they work from PAYE data. Repayments resume automatically when you earn above threshold again.
Interest accrues at RPI regardless of employment status. 1 year unemployed on £50k balance at 3% RPI = £1,500 additional debt. But for most graduates, this additional debt will be written off at 40 years anyway. Only high earners who'll fully repay should worry about unemployment-period interest accumulation.
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.