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. With the average graduate leaving university with over £45,000 of debt, student loan repayments are the single largest deduction many people see after income tax and National Insurance. Whether you started university before 2012 (Plan 1), between 2012 and 2023 (Plan 2), or from September 2023 onwards (Plan 5), the rules are different — and getting them wrong can cost you thousands.
This guide covers every plan type, exactly what you’ll repay at each salary level, when voluntary overpayments make sense, and how your loan affects everything from mortgage applications to take-home pay.
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 |
If you’re not sure which plan you’re on, check your payslip — it will show a student loan deduction type. You can also log in to your Student Loans Company (SLC) account to see your plan, balance, and repayment history. For a broader overview of how UK student finance works — including maintenance loans, grants, and eligibility — see our UK student loans guide.
Monthly Repayments by Salary
The key thing to understand is that repayments are income-contingent — you only pay a percentage of earnings above your plan’s threshold, not on your entire salary. This means repayments scale with what you earn, and if your income drops below the threshold (due to job loss, career break, or part-time work), repayments pause automatically.
Plan 2 (Most Current English/Welsh Graduates)
9% of income above £27,295. To see exactly how these deductions affect your take-home pay, use our salary calculators:
| 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 |
At the average UK salary of around £35,000, a Plan 2 borrower pays just £58 per month — about £2 a day. That’s manageable, but it adds up over decades, especially when interest is compounding faster than you’re repaying (see the interest rates section below).
Plan 5 (From September 2023)
9% of income above £25,000. The lower threshold means graduates on Plan 5 start repaying sooner than Plan 2 borrowers:
| 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 5 borrowers repay roughly £17/month more than Plan 2 at the same salary (due to the £2,295 lower threshold). However, the trade-off is significantly fairer interest rates — RPI only, with no income-linked premium. Over a career, this can save tens of thousands in accumulated interest.
Plan 1 (Pre-2012 Graduates)
9% of income above £24,990. Most Plan 1 borrowers had much smaller balances (tuition was capped at ~£3,375/year) and favourable interest rates:
| 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 |
Many Plan 1 borrowers are now in their 30s and 40s with relatively small remaining balances. If you’re within a few thousand pounds of clearing your Plan 1 loan, voluntary repayment may make sense — especially since you’ll immediately stop losing 9% of income above the threshold, freeing up cash for pension contributions or ISA investing.
Postgraduate Loan
6% of income above £21,000 (paid alongside Plan 2/5 if applicable). This is where the combined burden gets heavy:
| 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. At £40,000, that’s £190/month — a significant chunk on top of income tax, National Insurance, and pension auto-enrolment. If you’re budgeting on a graduate salary with dual loans, factor this deduction in before committing to rent or car finance.
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. For Plan 2 borrowers earning above £49,130, interest accrues at RPI + 3% (currently 7.3%), which means your balance can grow faster than you’re repaying it. This is the primary reason most Plan 2 graduates will never clear their loan — and why overpaying rarely makes financial sense unless you’re a consistent high earner.
By contrast, Plan 1 and Plan 4 borrowers benefit from interest capped at 1.5%, which is well below the current savings account rates. If you’re on Plan 1, keeping your money in a high-interest savings account rather than making voluntary repayments can often be the smarter move.
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. This is a crucial insight: if you’re never going to clear the balance anyway, every pound you voluntarily overpay is a pound wasted. The written-off amount is completely tax-free and doesn’t affect your credit score or appear on any credit check.
Student Loan vs Graduate Tax
For most borrowers, thinking of it as a 9% tax above the threshold is more accurate. The psychological framing matters — calling it a “loan” creates pressure to overpay, but the mechanics are closer to a time-limited graduate contribution:
| 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 |
The general rule: if you won’t repay in full within the write-off period, every voluntary overpayment is money you could have put into an ISA, pension, or emergency savings instead. The opportunity cost is real — £100/month invested in a stocks and shares ISA over 20 years at 7% average returns would grow to roughly £52,000 tax-free.
Impact on Mortgage Affordability
Lenders consider student loan repayments when calculating your mortgage affordability. This is one of the most overlooked consequences of student debt — it doesn’t appear on your credit file, but it directly reduces what you can borrow:
| 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. For first-time buyers already stretching to afford average house prices, this can be the difference between qualifying and being declined. It’s worth running the numbers through a mortgage payment calculator to see how your repayments affect what you can realistically borrow.
If you’re on Plan 1 with a small remaining balance, clearing it before applying for a mortgage can meaningfully increase your borrowing power. For Plan 2 borrowers, the calculation is different — the repayments reduce affordability regardless of your remaining balance, so overpaying doesn’t help unless you can clear the loan entirely.
Repayment While Self-Employed
If you’re self-employed, student loan repayments are calculated on your Self Assessment tax return rather than deducted monthly via PAYE:
| 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. This means you need to budget for the repayment alongside your income tax and National Insurance bill on 31 January. If cash flow is tight, set aside the student loan portion monthly in a savings account so you’re not caught out. HMRC can add penalties if you miss the deadline.
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. For example, graduates moving to lower-cost countries can find themselves repaying a higher percentage of their income than they would in the UK. Failure to notify the SLC can result in fixed monthly repayments being imposed — typically higher than what you’d pay under the income-contingent system. The loan continues to accrue interest regardless of where you live, and the write-off timeline doesn’t pause while you’re overseas.
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. The net effect is that more Plan 5 borrowers will repay in full (because interest isn’t outpacing their repayments), but those who don’t will be making repayments for up to 40 years — potentially into their early 60s. Whether this is “better” depends entirely on your career trajectory and expected lifetime earnings.
For most graduates earning between £25,000 and £50,000, the functional difference between Plan 2 and Plan 5 is small in monthly terms. The real difference plays out over decades in total interest paid.
Key Takeaways
- Student loans are repaid at 9% of income above your plan’s threshold — it comes straight from your payslip alongside income tax and National Insurance
- 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 put that money into ISAs or pension contributions instead
- 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 and doesn’t affect your credit score