Plan 2 Student Loan Repayment Threshold in 2026/27: What Changed and What It Means

Quick answer

For the 2026/27 tax year, the Plan 2 student loan repayment threshold is £29,385. Anyone with a Plan 2 loan — broadly, English and Welsh undergraduates who started their course between September 2012 and July 2023 — repays 9% of income above this threshold, deducted automatically through PAYE alongside income tax and National Insurance.

How the deduction actually appears on a payslip

Employers apply the threshold on a pro-rated basis for each pay period — roughly £2,449 a month or £565 a week for 2026/27 — rather than waiting until the annual figure is reached. This means someone with an irregular income (bonus months, overtime, or a mid-year pay rise) can see deductions vary month to month even if their annual salary stays the same, because PAYE calculates the deduction period by period rather than against a running annual total. Self Assessment reconciles the full-year position for anyone who also files a tax return.

Why a rising threshold doesn't always mean lower repayments

The Plan 2 threshold is reviewed and can be adjusted each tax year, but whether that translates into higher or lower actual repayments for an individual depends entirely on how their own salary has moved in the same period. A graduate whose salary has grown faster than the threshold increase will still see their repayment amount rise in cash terms, even though the threshold itself has also gone up — the threshold change only benefits someone whose income has stayed flat or grown more slowly.

Plan 2 and Postgraduate Loans together

Graduates who took out both an undergraduate Plan 2 loan and a separate Postgraduate Loan for a master's degree repay both simultaneously if their income is above both thresholds — 9% above £29,385 for the Plan 2 loan, and a further 6% above £21,000 for the Postgraduate Loan, deducted independently rather than combined into a single rate. This can mean a combined deduction rate of 15% on income above the higher of the two thresholds, which is worth factoring into take-home pay planning for anyone with both loan types.

Bottom line

Check which plan type actually applies before assuming a "typical" student loan deduction — Plan 2, Plan 5 and Postgraduate Loans have different thresholds and rates, and the 2026/27 Plan 2 threshold of £29,385 only tells part of the story if a graduate is also repaying a Postgraduate Loan at the same time.

Sources

• gov.uk: Repaying your student loan
• Student Loans Company: Repayment thresholds and rates