Student loan repayments explained
More like a graduate tax than a debt — and the plan you are on changes almost everything.
Student loan repayment is one of the most misunderstood deductions on a UK payslip. It behaves far more like a graduate tax than a normal debt, and knowing which plan you are on changes almost everything about how you should think about it.
Repayment thresholds for 2026/27
- Plan 1 — £26,900 · 9% above threshold
- Plan 2 — £29,385 · 9% above threshold
- Plan 4 (Scotland) — £33,795 · 9% above threshold
- Plan 5 — £25,000 · 9% above threshold
- Postgraduate (Plan 3) — £21,000 · 6% above threshold
Which plan am I on?
| Plan | Who it applies to |
|---|---|
| Plan 1 | England & Wales, started before Sept 2012; all Northern Ireland students |
| Plan 2 | England & Wales, started Sept 2012 – July 2023 |
| Plan 4 | Scottish students funded by SAAS |
| Plan 5 | England, started on or after 1 August 2023 |
| Postgraduate (officially Plan 3) | Master's and doctoral loans — runs alongside an undergraduate plan |
A note on numbering: there is no separate "Plan 3" in the undergraduate series. Plan 3 is the Postgraduate Loan — government and HMRC documents use the number, while payslips and lenders usually say "Postgraduate". If you see Plan 3 mentioned in official guidance, it means the postgraduate loan.
Wondering where Plan 3 is? There is no separate Plan 3 in the undergraduate series — Plan 3 is the Postgraduate Loan. Government and HMRC documents use the number; payslips say "PGL". We cover it in full in the Plan 3 guide.
You can be on more than one plan at once. Holding both an undergraduate and a postgraduate loan means 9% above one threshold plus 6% above £21,000 — up to 15% of income in the overlap.
You repay 9% of the amount above the threshold, not of your salary
This is the single most common misunderstanding. On Plan 2 with a £35,000 salary, you earn £5,615 above the £29,385 threshold. Nine percent of that is roughly £505 a year — about £42 a month. Not 9% of £35,000.
Earn below your threshold and you pay nothing at all. If your income drops, repayments stop automatically.
Plan 5 started repaying in April 2026
April 2026 was the first month that Plan 5 borrowers — English students who began courses from August 2023 — started repaying. At £25,000 it is the lowest starting threshold of any undergraduate plan, so repayments begin earlier in a career than on previous plans.
The offsetting feature is interest: Plan 5 charges RPI only, with no additional percentage on top, whereas Plan 2 runs on a sliding scale up to RPI plus 3% for higher earners. The catch is the write-off period — Plan 5 loans run 40 years, against 30 for Plan 2, which means Plan 5 borrowers are considerably more likely to repay their loan in full.
The threshold freeze that quietly costs graduates
The Plan 2 threshold rose to £29,385 in April 2026, then is frozen at that level until April 2030 following the Autumn Budget 2025. Because wages keep rising while the threshold stands still, more graduates cross into repayment each year and existing borrowers repay a little more in real terms annually — without any rate ever changing.
Interest is capped for Plan 2
The government announced in April 2026 that interest on Plan 2 and Plan 3 (postgraduate) loans would be capped at 6% from 1 September for the 2026/27 academic year. Interest affects your total balance rather than your monthly payment, which stays fixed at 9% of income above the threshold regardless.
Should you overpay?
Usually not — and this is where student loans differ sharply from other debt.
Your loan is written off after a set period regardless of the balance: 30 years after the April following graduation for Plan 2, 40 years for Plan 5. If you are never going to clear the balance before write-off, voluntary overpayments simply hand over money you would never have been asked for. Repayments also stop automatically if you lose your job or your income falls, which no commercial lender offers.
Overpaying can make sense in a narrow case: a high earner on Plan 5 who is clearly on track to repay in full well before the 40 years are up. For most graduates, the same money in a pension or ISA does considerably more.
See the effect on your monthly pay
Our take-home pay calculator covers income tax and National Insurance. Add roughly 9% of anything above your plan's threshold to estimate the student loan deduction on top.
Open the take-home pay calculator →Three practical points
- Deductions are per pay period. A month with overtime or a bonus can trigger a larger deduction than your annual salary alone would suggest.
- It does not affect your credit score. Student loans are not on your credit file, though mortgage lenders do count the repayment as a committed outgoing when assessing affordability.
- Tell the Student Loans Company if you move abroad for more than three months, or you can accrue arrears.
Common questions
What is the student loan repayment threshold for 2026/27?
Plan 1 is £26,900, Plan 2 is £29,385, Plan 4 is £33,795, Plan 5 is £25,000 and Postgraduate is £21,000. Undergraduate plans repay 9% of income above the threshold; postgraduate loans repay 6%.
Do I repay 9% of my whole salary?
No. You repay 9% only of the amount above your plan's threshold. On Plan 2 earning £35,000, that is 9% of £5,615, which works out at roughly £42 a month.
Should I pay off my student loan early?
For most graduates, no. The balance is written off after 30 years on Plan 2 or 40 years on Plan 5, and repayments stop automatically if your income falls. Overpaying only helps if you are clearly going to repay in full before write-off, which is more likely for higher earners on Plan 5.
Why is there no Plan 3?
There is. Plan 3 is the official name for the Postgraduate Loan, which is why it does not appear as a separate undergraduate plan. Government and HMRC documents tend to use the number, while payslips and most guidance say "Postgraduate". It repays 6% of income above £21,000 and runs alongside any undergraduate plan you hold.
Does a student loan affect my credit score?
It does not appear on your credit file. However, mortgage lenders count the monthly repayment as a committed outgoing in their affordability assessment, so it can reduce how much you are able to borrow.