At the end of March 2024, the outstanding student loan debt in the UK stood at £236 billion.[i] If that figure is making you queasy, the idea that it is forecast to rise to around £500 billion by the late-2040s will be of little comfort. Luckily, no single dentist will be saddled with loan repayments of this size, but understanding where your student debt stands currently, and what it will look like in the years to come, is important.
There are a variety of loan plans that clinicians could be subject to, depending on the circumstances of their undergraduate and postgraduate education. Recognising the effect of the student loan on a clinician is important for effective management of personal finances.
A myriad of systems
A 2023 report from the British Dental Association (BDA) found that the total debt saddled at the feet of the average final year dental student and recent graduate sat at £52,922 in 2022.[ii] Just a decade earlier, this would have been nearly half, at £24,734 in 2013.ii
The amount of student loan debt that a dental professional pays back over time depends on their individual income – including bonuses – before tax and other deductions. It will be a percentage of earnings that are achieved after meeting the qualifying threshold, which changes with each loan type.
A dental professional’s student loan plan will differ dependent on their course type, university start date, and where they’re from. However, the main loan solutions are: Plan 1, Plan 2, Plan 4, Plan 5, and a Postgraduate loan (Plan 3).[iii]
Quick calculations
The loan repayment system is designed to be simple to predict and track, and make graduates capable of paying back their student debt over time. Dental professionals that are on a single plan will pay either 9% or 6% over their earning threshold, depending on if they are on Plan 1, 2, 4 or 5 (9%) or the Postgraduate loan (6%).
When working on a salaried contract, if an individual’s income exceeds the threshold for their plan over the course of a week or a month, a repayment will be required. However, if at the end of the tax year they did not meet the annual income, it is possible to request a refund on the loan repayment.[iv] This means it’s important to regularly check and keep track of your repayment values.
As self-employed professionals, HM Revenue and Customs will calculate the necessary repayments from many dental clinicians’ tax returns.iii Payments made from a salary will be deducted from this.
In the case that a clinician has undertaken an undergraduate and a postgraduate degree, and received loans to finance both, it’s important to understand that repayments for each debt will occur concurrently. Each repayment will be based on income made over the unique threshold for each debt. For a dental professional making £51,000 per year, who has a Postgraduate loan, and a Plan 1 undergraduate loan, their repayments will be calculated like this:
- Monthly gross income will equate to £4,250.
- The monthly threshold for the Postgraduate loan is £1,750, and excess earnings are subject to a 6% repayment. The individual earns £2,500 over this a month, and so will make a repayment of £150.
- The monthly threshold for the Plan 1 loan is £2,082, with a 9% repayment over this value. The individual earns £2,168 over the threshold (the Postgraduate payment makes no impact) and so pays another £195.12.
- In total, £345.12 is paid across the month, and £4,141.44 is paid over the year.
Interest
Student loans are subject to interest, and the applicable rates can cause confusion and make many individuals feel they will be unable to ever pay off the debt. Plan 1, 4 and 5 loans are subject to 4.3% annual interest, Postgraduate loans observe a 7.3% interest, but Plan 2 loans can observe anywhere from 4.3% to 7.3% depending on an individual’s earnings.
With a range of loan plans, varying repayment thresholds, and the effect of changing interest rates, dentists can seek guidance on their student loan repayments with the help of money4dentists. The team of expert independent financial advisers, with decades of collective experience, are able to help dental professionals understand their unique financial situations and make informed judgements on matters such as early repayment contributions towards a student loan. money4dentists also helps professionals manage other financial commitments with care, such as mortgages, practice loans, tax payments and pension contributions.
Student days may be long behind you, but loan repayments are a longstanding consideration for many clinicians. Understanding how to manage this debt is essential, and can be done with the right support of an independent financial adviser.
For more information, please call 0845 345 5060 or 0754DENTIST.
Email info@money4dentists.com or visit www.money4dentists.com
[i] Bolton, P., (2024). Student loan statistics. House of Commons Library. (Online) Available at: https://commonslibrary.parliament.uk/research-briefings/sn01079/ [Accessed September 2024]
[ii] British Dental Association, (2023). Action needed as dental student debt soars. (Online) Available at: https://www.bda.org/news-and-opinion/news/action-needed-as-dental-student-debt-soars/ [Accessed September 2024]
[iii] GOV.UK, (N.D.). Repaying your student loan. (Online) Available at: https://www.gov.uk/repaying-your-student-loan/what-you-pay [Accessed September 2024]
[iv] GOV.UK, (N.D.). Repaying your student loan. (Online) Available at: https://www.gov.uk/repaying-your-student-loan/what-you-pay [Accessed September 2024]
