Most UK graduates repay student loans automatically through their payslip — but few understand how much they’re actually paying, what interest is added, or when the loan gets written off. Here’s everything you need to know.
Table of Contents
Student Loan Plans at a Glance
| Feature | Plan 1 | Plan 2 | Plan 4 (Scotland) | Plan 5 | Postgraduate |
|---|---|---|---|---|---|
| Started university | Before Sept 2012 | Sept 2012 – July 2023 | Scotland (pre-2024) | From Sept 2023 (England/Wales) | Masters/PhD |
| Repayment threshold | £24,990/year | £27,295/year | £27,660/year | £25,000/year | £21,000/year |
| Repayment rate | 9% above threshold | 9% above threshold | 9% above threshold | 9% above threshold | 6% above threshold |
| Interest rate | RPI or 1.5% (lower of) | RPI + up to 3% | RPI or 1.5% (lower of) | RPI only | RPI + 3% |
| Written off after | 25 years | 30 years | 30 years | 40 years | 30 years |
| Max tuition covered | ~£3,375/year | £9,250/year | ~£1,820/year | £9,250/year | £12,167/year |
Monthly Repayments by Salary
Plan 2 (Most Current English/Welsh Graduates)
9% of income above £27,295:
| Gross Salary | Annual Repayment | Monthly Repayment | Daily Cost |
|---|---|---|---|
| £25,000 | £0 | £0 | £0 |
| £27,295 | £0 | £0 | £0 |
| £30,000 | £243 | £20 | £0.67 |
| £32,000 | £423 | £35 | £1.16 |
| £35,000 | £693 | £58 | £1.90 |
| £40,000 | £1,143 | £95 | £3.13 |
| £45,000 | £1,593 | £133 | £4.37 |
| £50,000 | £2,043 | £170 | £5.60 |
| £60,000 | £2,943 | £245 | £8.07 |
| £75,000 | £4,293 | £358 | £11.76 |
| £100,000 | £6,543 | £545 | £17.93 |
Plan 5 (From September 2023)
9% of income above £25,000:
| Gross Salary | Annual Repayment | Monthly Repayment |
|---|---|---|
| £25,000 | £0 | £0 |
| £30,000 | £450 | £38 |
| £35,000 | £900 | £75 |
| £40,000 | £1,350 | £113 |
| £50,000 | £2,250 | £188 |
| £60,000 | £3,150 | £263 |
| £75,000 | £4,500 | £375 |
| £100,000 | £6,750 | £563 |
Plan 1 (Pre-2012 Graduates)
9% of income above £24,990:
| Gross Salary | Annual Repayment | Monthly Repayment |
|---|---|---|
| £25,000 | £1 | £0 |
| £30,000 | £451 | £38 |
| £35,000 | £901 | £75 |
| £40,000 | £1,351 | £113 |
| £50,000 | £2,251 | £188 |
Postgraduate Loan
6% of income above £21,000 (paid alongside Plan 2/5 if applicable):
| Gross Salary | PG Repayment | Plan 2 Repayment | Combined Monthly |
|---|---|---|---|
| £30,000 | £540/yr (£45/mo) | £243/yr (£20/mo) | £65 |
| £40,000 | £1,140/yr (£95/mo) | £1,143/yr (£95/mo) | £190 |
| £50,000 | £1,740/yr (£145/mo) | £2,043/yr (£170/mo) | £315 |
| £60,000 | £2,340/yr (£195/mo) | £2,943/yr (£245/mo) | £440 |
Graduates with both an undergraduate and postgraduate loan can pay up to 15% of income above thresholds.
Interest Rates (2026/27)
| Plan | Interest Rate | How It’s Set |
|---|---|---|
| Plan 1 | 1.5% | Lower of RPI or Bank of England base rate + 1% |
| Plan 2 (while studying) | RPI + 3% (up to 7.3%) | Highest rate applies during study |
| Plan 2 (earning ≤ £27,295) | RPI (4.3%) | Rate decreases with income |
| Plan 2 (earning ≥ £49,130) | RPI + 3% (7.3%) | Maximum rate |
| Plan 4 | 1.5% | Same as Plan 1 |
| Plan 5 | RPI only | Capped at RPI — no extra margin |
| Postgraduate | RPI + 3% | Always the highest rate |
Plan 5’s interest rate is significantly more favourable than Plan 2 — the government removed the income-linked interest premium.
Will You Actually Repay Your Loan?
Most Plan 2 borrowers will not repay in full before the 30-year write-off:
| Starting Balance | Salary Trajectory | Total Repaid | Written Off | Fully Repaid? |
|---|---|---|---|---|
| £45,000 | £28K → £40K over 30 years | ~£30,000 | ~£60,000+ | No |
| £45,000 | £30K → £55K over 30 years | ~£55,000 | ~£25,000 | No |
| £45,000 | £35K → £75K over 30 years | ~£85,000 | £0 | Yes (year ~22) |
| £45,000 | £50K → £100K over 30 years | ~£120,000+ | £0 | Yes (year ~14) |
| £60,000 | £30K → £50K over 30 years | ~£45,000 | ~£75,000+ | No |
The IFS estimates only ~20-25% of Plan 2 borrowers will repay in full. For the majority, it functions more like a graduate tax.
Student Loan vs Graduate Tax
For most borrowers, thinking of it as a 9% tax above the threshold is more accurate:
| Perspective | Implications |
|---|---|
| It’s a loan | You might want to overpay to clear it faster |
| It’s a graduate tax | Overpaying wastes money if the balance would be written off anyway |
Should You Make Voluntary Repayments?
| Your Situation | Overpay? | Why |
|---|---|---|
| Plan 2, earning £30-50K | No | Very likely to be written off — extra payments are wasted |
| Plan 2, earning £75K+ consistently | Maybe | You’ll likely repay anyway; overpaying saves interest |
| Plan 1, small balance remaining | Yes | Low threshold means you’re paying 9% on more income |
| Plan 5, earning under £60K | No | 40-year term means very likely to be written off |
| Close to write-off date | No | Let the remaining balance be cancelled |
Impact on Mortgage Affordability
Lenders consider student loan repayments when calculating your mortgage affordability:
| Salary | Monthly SL Repayment (Plan 2) | Mortgage Reduction (approx.) |
|---|---|---|
| £30,000 | £20 | ~£5,000-8,000 |
| £40,000 | £95 | ~£25,000-35,000 |
| £50,000 | £170 | ~£45,000-55,000 |
| £60,000 | £245 | ~£65,000-75,000 |
At a £50K salary, student loan repayments could reduce your maximum mortgage by roughly £50,000.
Repayment While Self-Employed
If you’re self-employed, student loan repayments are calculated on your Self Assessment tax return:
| Self-Employment Profit | Plan 2 Repayment | Due Date |
|---|---|---|
| £30,000 | £243 | 31 January (with tax return) |
| £40,000 | £1,143 | 31 January |
| £50,000 | £2,043 | 31 January |
| £75,000 | £4,293 | 31 January |
Self-employed borrowers pay the full annual amount in one lump sum rather than monthly via PAYE.
Living and Working Abroad
If you move overseas, you must:
- Notify the Student Loans Company (SLC)
- Provide income evidence annually
- Repay based on the country-specific threshold (set by the SLC)
Some country thresholds are lower than UK thresholds, meaning you may pay more abroad.
Plan 2 vs Plan 5 Comparison
| Feature | Plan 2 (2012-2023) | Plan 5 (2023+) |
|---|---|---|
| Threshold | £27,295 | £25,000 |
| Interest | RPI + 0-3% (income-linked) | RPI only |
| Write-off | 30 years | 40 years |
| Start repaying at lower salary | No | Yes |
| Total interest over lifetime | Very high | Lower |
| Likely to repay in full | ~20-25% | Higher % (lower interest) |
Plan 5 has a lower threshold and longer repayment period, but significantly fairer interest rates.
Key Takeaways
- Student loans are repaid at 9% of income above your plan’s threshold — it comes straight from your payslip
- Most Plan 2 borrowers won’t repay in full — only ~20-25% will clear the balance before the 30-year write-off
- Don’t overpay unless you’re a high earner who will definitely repay in full — otherwise you’re giving away money
- Plan 5 is fairer than Plan 2 — RPI-only interest (no +3% premium), but the trade-off is a 40-year term
- Postgraduate loans stack on top of undergraduate — combined repayments can reach 15% of income above thresholds
- Student loans reduce mortgage borrowing — lenders factor repayments into affordability, potentially cutting £25,000-75,000 from your maximum mortgage
- Loans are written off after 25-40 years depending on plan — the remaining balance disappears tax-free
