Postgraduate Loan (Plan 3) Repayment: What Happens When You Have Two Loans

The Postgraduate Loan (sometimes informally referred to as Plan 3, though HMRC and the Student Loans Company most commonly just call it the Postgraduate Loan) is a separate loan taken out to fund a postgraduate master's or doctoral course, distinct from the undergraduate Plan 1, 2, 4 or 5 loans. It has its own repayment threshold and rate, and — critically — is repaid independently of and simultaneously with any undergraduate loan you may also be repaying, rather than replacing it.

The Postgraduate Loan is repaid at 6% of income above a threshold of £21,000 a year in 2026/27. This is separate from, and calculated independently of, any undergraduate loan threshold and rate you might also be subject to — the two loans don't share a combined threshold or get netted against each other.

Yes, and this is the single most important thing to understand about Postgraduate Loan repayment. If you have both an undergraduate loan (Plan 1, 2, 4 or 5) and a Postgraduate Loan, both are repaid simultaneously through PAYE, each calculated independently against its own threshold and rate, and the two deductions are then added together to give your total monthly student loan repayment. This can mean a combined repayment rate well above what either loan would charge on its own.

Your employer's payroll software calculates each loan separately: the undergraduate plan deduction is worked out as its rate (typically 9%) applied to income above its own threshold, and the Postgraduate Loan deduction is worked out as 6% applied to income above the £21,000 postgraduate threshold. These two deductions are calculated independently — each against the full amount of income above its own threshold, not a shared or reduced amount — and then simply added together and deducted from your pay in the same pay period.

Because they're legally and administratively separate loan products with their own terms, set at different times and under different loan agreements — an undergraduate loan funds a first degree, while a Postgraduate Loan is a distinct product introduced later to fund master's and doctoral study. HMRC and the Student Loans Company treat them as two separate repayment obligations that happen to run through the same payroll deduction mechanism, rather than merging them into one combined threshold, which is why someone with both can end up with a meaningfully higher combined deduction rate than either loan alone.

Not necessarily faster in terms of total time, but you are certainly repaying more each month in combined pounds, since both deductions apply simultaneously. Each loan is repaid, and eventually written off, according to its own separate terms and write-off timeline — clearing the Postgraduate Loan doesn't shorten the undergraduate loan's term, and vice versa. The higher combined monthly deduction reduces both balances concurrently, but each loan's own write-off date and interest terms continue to apply independently.

The Postgraduate Loan typically accrues interest at a rate linked to RPI (the Retail Prices Index) plus a margin, reviewed and set periodically — the exact prevailing rate should be checked against current Student Loans Company published rates for the year in question, since it's reviewed regularly and isn't a fixed figure that stays constant for the life of the loan. This interest rate and its calculation basis is separate from whichever rate applies to any undergraduate loan you may also hold, since the two loans have distinct interest-rate rules.

Yes — once you've notified HMRC (typically via your Self Assessment registration or through your employer starting deductions after being notified by the Student Loans Company) that you have a Postgraduate Loan, your employer deducts repayments automatically through PAYE alongside any undergraduate loan deduction, shown as a separate line on your payslip. If you're self-employed, both loan repayments are instead calculated and collected through your Self Assessment tax return rather than PAYE.

No — if your income is above both thresholds, both deductions are mandatory and automatic through payroll; you can't opt to repay only the undergraduate loan or only the Postgraduate Loan while your income qualifies for both. Voluntary overpayments directed specifically at one loan rather than the other are possible by arrangement directly with the Student Loans Company outside of the standard payroll deduction, if you specifically want to accelerate paying off one loan faster than the automatic mechanism would achieve.

Your payslip should show separate lines (or a combined figure your payroll department can break down) for each loan plan you're repaying, and your Student Loans Company online account shows the current balance, interest accrued, and repayments made for each loan separately. Because the two loans are genuinely independent products, it's worth checking both balances individually rather than assuming a single combined 'student loan' figure tells you the full picture of what's outstanding on each.