Student Loan Plan 5 Explained: Repayments, Thresholds and Write-Off Rules 2026

Student Loan Plan 5 is the repayment system that applies to English students who started their undergraduate or postgraduate degree from August 2023 onwards. It comes with a lower repayment threshold, a longer write-off period, and different interest rules than the Plan 2 system it replaced. Understanding exactly how it works — and whether it makes sense to make voluntary overpayments — is essential for anyone starting or recently completing a degree under these terms.

Who Is on Plan 5?

Plan 5 applies to:

• English domiciled students who started their first undergraduate degree on or after 1 August 2023
• Studying at an English, Welsh, or Northern Irish university (or distance learning from outside these)

If you started before August 2023, you are on a different plan:

If you are a Welsh, Scottish, or Northern Irish student, Plan 5 does not apply to you — check your individual correspondence from the Student Loans Company (SLC).

The Repayment Threshold

Under Plan 5, you begin repaying your student loan once your income exceeds £25,000 per year (before tax).

This threshold is frozen until 2027 at the earliest under current government policy — it will not rise with inflation or wage growth in the short term. This is a significant difference from Plan 2, where the threshold was index-linked to RPI and rose over time. A frozen threshold means that as wages increase, more graduates will be pulled into repayments over time.

The threshold applies to your gross income from all sources: employment, self-employment, rental income, savings interest above the Personal Savings Allowance, and so on.

Monthly and Weekly Equivalents

You only make repayments in months where your income exceeds the monthly equivalent (£2,083). If you earn less in a particular month — for example, because you worked part-time or had a period of reduced hours — no deduction is made for that month, even if your annual average is above £25,000.

The Repayment Rate: 9% Above the Threshold

Once your income exceeds £25,000, you repay 9% of everything above the threshold. This applies to employment income, which is deducted automatically through the PAYE system — you do not need to do anything yourself.

The repayment is calculated on income above £25,000, not on your total income. So:

• If you earn exactly £25,000: £0 repayment
• If you earn £25,001: 9p per year repayment (negligible)

Annual Repayments by Salary

Unlike income tax, there is no higher repayment rate for very high earners — it remains 9% above the threshold regardless of how much you earn.

The 40-Year Write-Off

Any outstanding Plan 5 balance that has not been repaid is written off 40 years after the April following the date you left your course.

For example:

• You graduate in June 2026
• The write-off clock starts from April 2027
• Your loan will be written off in April 2067 — when you are likely in your mid-60s

This 40-year period is significantly longer than Plan 2's 30-year write-off, and is one of the most consequential changes introduced with Plan 5. Many graduates under Plan 2 saw their loans written off before they had fully repaid, meaning the total repayment was well below the amount borrowed. Under Plan 5, the longer timeline means more graduates will repay more of their loan before write-off — though, as we will see, many will still not repay in full.

Interest on Plan 5

The interest rate on a Plan 5 loan is set at:

• While studying and before April after leaving course: RPI (Retail Price Index) + 3%
• After leaving and in repayment: RPI only (0% real interest)

This is a significant change from Plan 2, where interest reached RPI + 3% during repayment for higher earners and only reduced to RPI for those earning below the threshold.

For Plan 5, the moment you leave your course, the interest rate drops to RPI alone. This means your debt is maintained in real terms — it does not grow in real purchasing power terms — but it does increase each year by the RPI rate.

Current Interest Rate Context

RPI in April 2026 stood at approximately 3.4%. This means:

• While studying: interest rate ~6.4% (RPI 3.4% + 3%)
• After leaving: interest rate ~3.4% (RPI only)

Loan statements from the SLC reflect the interest accruing, which can be alarming — a £50,000 loan accumulates around £1,700 in interest in the first year after graduation. However, as the analysis below shows, whether this interest matters depends on whether you will ever repay the full balance.

Plan 5 vs Plan 2: Key Differences

The lower threshold, longer write-off, and (previously) absence of the higher-earner interest surcharge mean that lower-to-middle earners will repay more in total under Plan 5 than they would have under Plan 2. High earners, who would have faced RPI + 3% interest under Plan 2, actually face a lower interest rate under Plan 5 in repayment.

Will You Fully Repay Your Plan 5 Loan?

The answer depends heavily on your earnings trajectory. Research by the Institute for Fiscal Studies (IFS) suggests that under Plan 5:

• Lower earners (below median): Will repay far less than the total borrowed — significant portion written off after 40 years
• Middle earners: Will repay roughly the amount borrowed, but some interest remains written off
• Higher earners: Will fully repay the loan, often within 15–20 years of leaving university

Rough Illustration

Assume a student borrows £60,000 (three years at £20,000 per year including maintenance), graduates in 2026, and earns the following:

Scenario A — £28,000 starting salary, 2% real wage growth:

• Monthly repayment in year 1: ~£22.50
• Will likely never repay principal in full — loan written off after 40 years
• Total actually repaid: significantly below £60,000

Scenario B — £35,000 starting salary, 3% real wage growth:

• Monthly repayment in year 1: £75
• Will repay an increasing proportion — may fully repay in 25–30 years
• Total repaid: approximately £60,000–£80,000 depending on salary growth

Scenario C — £50,000 starting salary, growing to £80k+ within 10 years:

• Will fully repay within ~15 years
• Total repaid: well above original borrowing due to interest

The key insight: for most Plan 5 graduates, the student loan functions more like a graduate tax than a conventional loan. The amount you repay is determined primarily by your earnings, not by your original loan balance. Treating it as a debt in the same sense as a credit card or mortgage leads to poor financial decisions.

Should You Make Voluntary Overpayments?

In almost all cases, the answer for Plan 5 graduates is no — making voluntary overpayments is rarely financially rational.

Why Overpayments Usually Do Not Make Sense

1. Interest rate is RPI only (after leaving): Your loan is not growing in real terms. There is no compounding interest penalty for carrying the balance.

2. If you will not fully repay anyway: Any voluntary overpayment made by someone whose loan will ultimately be written off is simply a gift to the government. That money would have been better invested or used elsewhere.

3. Opportunity cost: £1,000 invested in an ISA at 7% grows to ~£7,600 in 30 years. £1,000 paid voluntarily off a student loan just reduces a balance that may be written off anyway.

4. No partial write-off benefit: If £10,000 of your loan will be written off regardless, paying it off early gains you nothing compared to repaying only what you were going to repay through PAYE.

The One Scenario Where Overpayment Might Make Sense

If you are a high earner who is certain you will fully repay the loan before the write-off date, and the RPI interest rate is higher than the after-tax return on alternative investments, there may be a narrow case for overpaying. Given that RPI is currently ~3.4% and after-tax returns on cash ISAs are around 4–5%, even this case is weak.

Consult a financial adviser if you are a high earner with a large loan balance and are considering significant voluntary repayments.

How Plan 5 Affects Your Take-Home Pay

The student loan deduction appears on your payslip after income tax and National Insurance have been calculated. It does not reduce your taxable income.

Take-Home Comparison: £35,000 Salary, 2026/27, Plan 5

The £75/month deduction is the cost of carrying a Plan 5 loan at £35,000 salary. This figure grows as your salary rises.

Overseas Working and Plan 5

If you move abroad, you are still required to repay your student loan if your income exceeds the UK threshold (converted to local currency equivalent). The SLC provides overseas repayment thresholds and you must notify them if you move abroad. Failure to notify can result in a flat-rate repayment demand and penalty interest.

Postgraduate Loans and Plan 5 Interaction

If you have both an undergraduate Plan 5 loan and a Postgraduate Loan (Plan 3), repayments are calculated separately:

• Plan 5: 9% above £25,000
• Plan 3 (Postgraduate): 6% above £21,000

If you earn £35,000, you would repay:

• Plan 5: 9% × £10,000 = £900/year
• Plan 3: 6% × £14,000 = £840/year
• Total: £1,740/year (£145/month)

These deductions are cumulative and both appear on your payslip.

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Use our Student Loan Repayment Calculator, Take-Home Pay Calculator, or Student Loan Calculator to see your exact monthly deductions at your current or projected salary, and to model how long it would take you to repay under different earnings scenarios.