Answers · UK 2025/26
What is the difference between Plan 2 and Plan 5 student loans?
Plan 2 (England/Wales 2012-July 2023): threshold £28,470, 9% above, written off after 30 years, RPI+3% interest. Plan 5 (England, from August 2023): threshold £25,000, 9% above, written off after 40 years, RPI only (lower interest). Plan 5 grads pay more overall on middle incomes.
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UK Plan 2 vs Plan 5 student loan comparison 2025/26. Plan 2 — applies to England/Wales university students who started undergraduate courses between 1 September 2012 and 31 July 2023. Threshold: £28,470. Repayment rate: 9% above threshold. Interest: RPI + 3% during study and after graduation (variable, capped at base+1% under "interest rate cap" since 2022). Write-off: 30 years after first April you were due to repay. Plan 5 — applies to England undergraduate students starting courses from 1 August 2023. Threshold: £25,000 (lower). Repayment rate: 9% above threshold. Interest: RPI only (not RPI+3%) — much less compounding. Write-off: 40 years (longer term — major change). Lifetime cost comparison. £35k starter rising to £55k over career. Plan 2: pays back faster because of higher threshold but compounding RPI+3% means many never clear. Many write off £20-£40k unpaid. Plan 5: starts paying back sooner (lower threshold) but lower interest means lifetime cost lower — but 40-year repayment captures more of middle career earnings. For middle-earner graduates (£35-£50k average career), Plan 5 actually costs MORE lifetime than Plan 2 — paradox of "lower interest, longer term". Postgraduate loans (PGL): separate, 6% rate, £21,000 threshold, 30-year write-off. Voluntary overpayments rarely cost-effective for either Plan 2 or Plan 5.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.