Student Loan Plan 2 vs Plan 5: How Repayments Actually Differ in 2026/27
Plan 2 and Plan 5 student loans both charge 9% above a repayment threshold, but the thresholds and write-off terms are very different — and it makes a real difference to lifetime repayment for many graduates. Here's the side-by-side comparison.
The Core Numbers, Side by Side
| Feature | Plan 2 | Plan 5 |
|---|---|---|
| Who's on it | Most English/Welsh undergrads, started 2012-2023 | English undergrads, started Sept 2023 onwards |
| 2026/27 repayment threshold | £29,385/year | £25,000/year |
| Repayment rate above threshold | 9% | 9% |
| Interest rate basis | RPI, up to RPI+3% while studying/for higher earners | Capped at RPI |
| Write-off period | 30 years from first repayment due | 40 years from first repayment due |
The headline repayment rate is identical — 9% — so the difference comes entirely from the threshold, the interest structure, and how long the loan remains active before any unpaid balance is written off.
Worked Example: Same Salary, Different Plan
Take a graduate earning £32,000 a year, paid monthly.
| Plan | Annual threshold | Income above threshold | Annual repayment (9%) | Monthly repayment |
|---|---|---|---|---|
| Plan 2 | £29,385 | £2,615 | £235 | ~£19.60 |
| Plan 5 | £25,000 | £7,000 | £630 | ~£52.50 |
At this salary, the Plan 5 graduate repays roughly 2.7 times more per month than a Plan 2 graduate on the identical income, purely because of the lower threshold capturing a larger slice of their salary.
Why the Lower Threshold Doesn't Automatically Mean "Worse"
It's tempting to see Plan 5's lower threshold and higher monthly repayment as simply a worse deal, but the full picture is more nuanced:
- Longer write-off (40 vs 30 years) means Plan 5 graduates who don't clear their balance keep repaying for a decade longer than Plan 2 graduates would — more total months of 9% deductions.
- Interest capped at RPI for Plan 5, versus Plan 2's structure that can add up to 3 percentage points above RPI for higher earners, means Plan 5 balances may grow more slowly in real terms for higher earners specifically, even though more income is captured monthly.
- Total repaid depends entirely on lifetime earnings trajectory. A Plan 5 graduate who reaches high earnings quickly could, in principle, clear their loan before the 40-year mark — in which case the lower threshold accelerated repayment rather than extending total cost. A graduate on modest, steady earnings under Plan 5 is more likely to repay for the full 40 years, potentially repaying substantially more in absolute terms than an equivalent Plan 2 graduate would have over 30 years.
There is no single "better" answer that applies to all graduates — it depends heavily on projected career earnings.
What If You Have Loans on Two Plans?
Graduates with, for example, an undergraduate loan (Plan 2) and a postgraduate loan (Postgraduate Loan plan, threshold £21,000, rate 6%) repay both simultaneously via separate deductions, each calculated against its own threshold. This can mean a combined repayment rate above 9% of income above the lower threshold — worth factoring into take-home pay planning if considering further study.
| Loan type | 2026/27 threshold | Rate |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 4 (Scotland) | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
How to Check Which Plan You're On
Your plan type is fixed by your course start date and home nation at the time you took out the loan — not a choice you make. To confirm:
- Log into your Student Loans Company online account — the plan type is shown on your statement.
- Check your payslip if employed — most payslips show which plan your employer is deducting under (though errors do happen, particularly for graduates who've recently changed jobs).
- If you believe your employer is deducting under the wrong plan, contact HR/payroll directly — an incorrect plan type can mean over- or under-deduction, both of which need correcting with the Student Loans Company.
Because the difference between plans meaningfully changes monthly take-home pay, it's worth confirming your correct plan type is reflected on your payslip shortly after starting any new job, particularly for graduates who studied under Plan 5 and may be defaulted incorrectly to Plan 2 by an employer unfamiliar with the newer plan type.
Frequently asked questions
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