UK Student Loans Explained: Plan 1, 2, 5 and How to Repay

By Wealthvieu · Updated

UK student loans are repaid at 9% of income above threshold — you only pay when you can afford to. Here’s everything you need to know.

Student Loan Plans

Plan When Started Threshold Write-Off
Plan 1 Before Sept 2012 £24,990 Age 65
Plan 2 Sept 2012 onwards £27,295 30 years
Plan 4 Scotland £31,395 30 years
Plan 5 Sept 2023 onwards £25,000 40 years
Postgraduate Masters/PhD loan £21,000 30 years

Repayment Thresholds 2026/27

Plan Weekly Monthly Annual
Plan 1 £480 £2,082 £24,990
Plan 2 £524 £2,274 £27,295
Plan 4 £603 £2,616 £31,395
Plan 5 £480 £2,083 £25,000
Postgraduate £403 £1,750 £21,000

How Much You’ll Repay

Plan 2 Monthly Repayments

Salary Monthly Repayment
£25,000 £0
£30,000 £20
£35,000 £58
£40,000 £95
£50,000 £170
£60,000 £245
£75,000 £358

Formula: (Salary - Threshold) × 9% ÷ 12

Plan 1 Monthly Repayments

Salary Monthly Repayment
£25,000 £0
£30,000 £37
£35,000 £75
£40,000 £112
£50,000 £187

Interest Rates

Plan 2 Interest

Income Interest Rate
Below £27,295 RPI (2-3%)
£27,295 - £49,130 RPI + up to 3%
Above £49,130 RPI + 3%
While studying RPI + 3%

Interest starts accruing from day one of university.

Plan 1 and Plan 5 Interest

Plan Interest Rate
Plan 1 Bank rate + 1% (capped at RPI)
Plan 5 RPI or bank rate + 2% (lower)

Plan 5 has lower interest than Plan 2.

Average Student Debt

Degree Type Average Debt
3-year degree £44,000
4-year degree £58,000
Medical degree £80,000+
With maintenance loan Higher

Most graduates will never fully repay.

Will You Repay in Full?

Plan 2 Repayment Projection

Starting Salary Career Growth Total Repaid Written Off
£25,000 2%/year £30,000 £45,000
£35,000 3%/year £75,000 £0
£50,000 3%/year £120,000+ £0

Most Plan 2 graduates won’t repay in full — loans written off after 30 years.

Who Should Consider Overpaying

Situation Overpay?
Will definitely clear loan Consider it
High earner (£60K+) Maybe
Low/middle earner Probably not
Might not repay in 30 years No

Rule: If you won’t clear loan naturally, don’t overpay — it’s written off anyway.

How Repayments Work

Employed (PAYE)

What Happens Details
Deducted from pay Automatic
Shown on payslip Student loan deduction
Starts First job above threshold
Employer knows Plan type from tax code

Self-Employed

What Happens Details
Through Self Assessment Annual payment
Due date 31 January
Calculate Based on profits

Loan Write-Off

Plan Write-Off Date
Plan 1 Age 65 (or earlier dates for old loans)
Plan 2 30 years after first April you were due to repay
Plan 4 30 years after first April you were due to repay
Plan 5 40 years after first April you were due to repay
Postgraduate 30 years

Write-off is tax-free — no income tax on forgiven amount.

Postgraduate Loans

Feature Details
Amount Up to £12,471
Repayment 6% above £21,000
Concurrent Can pay both UG and PG loans
Combined max repayment 15% total (9% + 6%)

Combined Loan Repayments

Salary Plan 2 (9%) Postgrad (6%) Total
£30,000 £20 £45 £65
£40,000 £95 £95 £190
£50,000 £170 £145 £315

Living Abroad

Situation Repayment
Living overseas Still owe
Threshold Adjusted by country
Collection Monthly direct debit
Not paying? Can affect UK credit

You must inform Student Loans Company of overseas addresses.

Plan 5 Changes (From 2023)

Change Plan 2 Plan 5
Threshold £27,295 £25,000
Interest cap RPI + 3% RPI or bank rate + 2%
Write-off 30 years 40 years
Better for Higher earners Lower/middle earners

Checking Your Loan Balance

  1. Go to gov.uk/student-finance-register-login
  2. Sign in
  3. View balance, interest, and repayments
  4. Check statement letters

Common Questions

Does Student Loan Affect Credit Score?

Factor Effect
Credit score No direct impact
Mortgage applications Affects affordability calculation
Treated as Income deduction, not debt

Should I Repay Early?

Consideration Answer
Will you clear naturally? If no, don’t overpay
Better use for money? Pension, ISA often better
Interest rate vs investments Compare returns
Certainty preference Emotional vs financial

What If I Overpaid?

Situation Action
Overpaid by error Claim refund from SLC
Job ended mid-year May get refund via tax
Loan fully repaid SLC refunds excess

Plan Comparison

Feature Plan 1 Plan 2 Plan 5
Threshold £24,990 £27,295 £25,000
Rate 9% 9% 9%
Interest Lower Higher Medium
Write-off Age 65 30 years 40 years
Most likely to repay Yes Some More

Bottom Line

Situation Strategy
Earning below threshold Pay nothing
Average earner Let it deduct automatically
High earner, will clear May overpay
Won’t clear in 30/40 years Never overpay
Going abroad Inform SLC

Key principles:

  1. UK student loans are unique — more like graduate tax
  2. Repayments are affordable (9% above threshold)
  3. Most won’t repay in full (especially Plan 2)
  4. Write-off is tax-free
  5. Don’t overpay unless you’ll definitely clear the loan
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