Student Loan Repayment Plans 2026: Plan 1, 2, 4, 5 and Postgraduate Rates Compared
Five UK student loan plans with different thresholds, write-off periods and interest rates in 2026/27. Find out which plan you're on, exactly how much you repay, and whether voluntary overpayments ever make sense.
How student loan repayments work
Unlike most debt, student loans are not repaid at a fixed monthly amount. You repay a percentage of your earnings above a threshold — and nothing at all if you earn below it. Stop working, go part-time, or take a career break and your repayments pause automatically.
This makes UK student loans function more like a graduate earnings tax than conventional debt — which has important implications for whether voluntary overpayments are ever sensible.
Repayments are collected through PAYE (for employees) or Self Assessment (for self-employed). The Student Loans Company administers the accounts but does not chase monthly payments — HMRC collects them.
The five plans at a glance (2026/27)
Plan 1
Who: Graduated in England or Wales before 1 September 2012; Scottish undergraduates who started before 1 September 1998; Northern Ireland undergraduates.
| Detail | Plan 1 |
|---|---|
| Repayment threshold | £24,990/year (£2,082.50/month) |
| Repayment rate | 9% above threshold |
| Interest rate | RPI or Bank of England base rate + 1% — whichever is lower |
| Write-off | Age 65 or 25 years from first repayment (whichever comes first) |
The interest cap (lower of two rates) means Plan 1 interest has been close to zero in some years when base rate + 1% was below RPI. In higher-rate environments, RPI becomes the cap.
Plan 2
Who: Started undergraduate in England or Wales from 1 September 2012 to 31 July 2023.
| Detail | Plan 2 |
|---|---|
| Repayment threshold | £28,470/year (£2,372.50/month) |
| Repayment rate | 9% above threshold |
| Interest rate | RPI + up to 3% (rate depends on income during study and repayment) |
| Write-off | 30 years from the April after first repayment falls due |
Plan 2 is the most commonly held plan. The interest rate during study (while at university) is RPI + 3%. During repayment it varies between RPI (for those earning up to £28,470) and RPI + 3% (for those earning above £49,130). Official figures suggest that around 70% of Plan 2 borrowers will not repay their full balance before it is written off — the average borrower will repay for 30 years and have the remainder cancelled.
Plan 4
Who: Scottish undergraduates who started from 1 September 1998.
| Detail | Plan 4 |
|---|---|
| Repayment threshold | £31,395/year (£2,616.25/month) |
| Repayment rate | 9% above threshold |
| Interest rate | RPI |
| Write-off | 30 years from the April after first repayment falls due |
Plan 4 has the highest threshold of all undergraduate plans, meaning Scottish graduates pay less each month for any given salary compared to English counterparts on Plan 2. Interest is RPI only — no additional margin.
Plan 5
Who: Started undergraduate in England from August 2023 onwards.
| Detail | Plan 5 |
|---|---|
| Repayment threshold | £25,000/year (£2,083.33/month) |
| Repayment rate | 9% above threshold |
| Interest rate | RPI only |
| Write-off | 40 years from the April after first repayment falls due |
Plan 5 is significantly less generous than Plan 2. The lower threshold means repayments start earlier (effectively £3,470/year lower than Plan 2). The 40-year write-off period (vs 30 years) means many more Plan 5 borrowers will repay their full balance. Interest is RPI only — lower than Plan 2's RPI + 3%, which is a partial improvement.
Postgraduate Loan
Who: Postgraduate master's or doctoral loan taken out from August 2016 (England and Wales only; separate arrangements in Scotland and Northern Ireland).
| Detail | Postgraduate Loan |
|---|---|
| Repayment threshold | £21,000/year (£1,750/month) |
| Repayment rate | 6% above threshold |
| Interest rate | RPI + 3% |
| Write-off | 30 years from the April after first repayment falls due |
The postgraduate threshold is lower than all undergraduate plans, and repayments begin concurrently with undergraduate plan repayments. If you have both a Plan 2 and a Postgraduate Loan and earn above both thresholds, both deductions apply simultaneously in the same payslip.
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Open Take-Home Pay calculatorWorked example: Anna, dual loan holder
Anna graduated from a master's degree in 2023. She has:
- A Plan 2 undergraduate loan (started 2018)
- A Postgraduate Loan
Her gross salary in 2026/27: £40,000/year (£3,333.33/month).
Plan 2 repayment:
- Threshold: £28,470/year
- Earnings above threshold: £40,000 − £28,470 = £11,530/year
- Repayment: 9% × £11,530 = £1,037.70/year = £86.48/month
Postgraduate Loan repayment:
- Threshold: £21,000/year
- Earnings above threshold: £40,000 − £21,000 = £19,000/year
- Repayment: 6% × £19,000 = £1,140/year = £95/month
Total monthly student loan deductions: £86.48 + £95 = £181.48/month
On top of income tax and NI, Anna's monthly deductions from £40,000 gross are:
- Income tax: approximately £460/month
- NI: approximately £225/month
- Student loans: £181/month
- Total monthly deductions: approximately £866
- Monthly take-home: approximately £2,467
Student loans represent 21% of Anna's total monthly deductions — a significant part of her payslip many people overlook in take-home pay planning.
Plan 2: the graduate tax reality
For Plan 2 borrowers, the most important question is not "how do I pay it off faster?" but "will I ever pay it off at all?"
Government projections suggest approximately 70% of Plan 2 borrowers will never fully repay. For someone who borrowed £50,000 (tuition + maintenance) at RPI + 3% interest, the balance can grow faster than repayments for low-to-middle earners in the early career years.
Consider two Plan 2 graduates:
Graduate A earns £60,000 by age 35 and will probably repay in full over 25+ years. For them, the loan functions like real debt and reducing it (or even overpaying) makes financial sense if they are certain of high lifetime earnings.
Graduate B earns £32,000 throughout their career. They repay 9% of £3,530/year = £317.70/year. Over 30 years: £9,531 repaid — against a balance that has grown considerably due to interest. The balance is written off. Any voluntary overpayments they made are wasted — they paid more than the mandatory system required, but the written-off balance would have gone regardless.
The implication: Do not voluntarily overpay a Plan 2 student loan unless you are certain of high lifetime earnings and confident you will repay in full before write-off.
When voluntary overpayments DO make sense
There are narrow circumstances where overpaying is rational:
-
Final year of repayment: if you are in your last year or two of the 30-year window and your remaining balance is small, overpaying to clear it prevents a final year of repayment deductions. But only if you are absolutely certain you are a net repayer.
-
Very high earners on Plan 5: with the 40-year write-off, higher earners may be certain they will repay in full. Here the loan works more like conventional debt and the interest rate matters — if RPI is 3–4%, that is competitive with some other borrowing.
-
Applying for a mortgage: student loan repayments affect the affordability assessment lenders carry out (they reduce your net income). A smaller outstanding balance does not directly help affordability (lenders care about monthly repayments, not the balance), but if repayments are still being made, clearing the loan removes the repayment from the affordability calculation — which can matter at the margin.
Monthly repayments by salary — quick reference (2026/27)
| Gross salary | Plan 1 (£24,990) | Plan 2 (£28,470) | Plan 4 (£31,395) | Plan 5 (£25,000) | PGL (£21,000) |
|---|---|---|---|---|---|
| £25,000 | £1/mo | £0 | £0 | £0 | £30/mo |
| £30,000 | £38/mo | £11/mo | £0 | £38/mo | £68/mo |
| £35,000 | £76/mo | £49/mo | £27/mo | £75/mo | £105/mo |
| £40,000 | £114/mo | £86/mo | £64/mo | £113/mo | £143/mo |
| £50,000 | £189/mo | £162/mo | £139/mo | £188/mo | £218/mo |
| £60,000 | £265/mo | £237/mo | £214/mo | £263/mo | £293/mo |
Note: PGL = Postgraduate Loan. Where both an undergraduate plan and PGL apply, deductions are concurrent.
Interest rates in 2026/27
Interest on student loans runs continuously, including while you are studying and before repayments start.
- Plan 1: RPI or BoE base rate + 1% (lower of the two). With base rate at 4.25%, that is 5.25% compared against current RPI — whichever is lower.
- Plan 2: RPI + up to 3% during study. In repayment: RPI + 0–3% sliding scale based on income (0% above threshold, +3% at £49,130+).
- Plan 4: RPI only.
- Plan 5: RPI only.
- Postgraduate Loan: RPI + 3% always.
For planning purposes: rising RPI environments increase interest burdens on all plans. For a Plan 2 borrower who will never repay in full, the interest rate is largely academic — it increases the balance that gets written off. For those who will repay in full, every percentage point of interest matters.
Sources
- Student Loans Company: Repayment thresholds and interest rates
- gov.uk: Repaying your student loan
- IFS: The distributional impact of student loan changes
- Money Saving Expert: Student loan overpayment guide
- HMRC: Student loan deductions — PAYE
Frequently asked questions
Which student loan plan am I on?
Plan 1: started university before September 2012 in England or Wales, or any time as a Scottish or Northern Irish undergraduate (pre-1998 Scottish students may have a different arrangement). Plan 2: started in England or Wales between September 2012 and July 2023. Plan 4: Scottish undergraduates who started from 1998 onwards. Plan 5: started in England from August 2023 onwards. Postgraduate Loan: postgraduate master's or doctoral loan taken out from 2016 in England and Wales.
Do I repay student loan automatically through payroll?
Yes. If you are employed, your employer deducts student loan repayments through PAYE — it appears on your payslip like income tax and NI. You do not need to arrange it yourself. If you are self-employed, you declare and pay your student loan via your Self Assessment tax return each year.
Should I make voluntary overpayments on my student loan?
For Plan 2 and Plan 4, voluntary overpayments are almost never financially beneficial. Roughly 70% of Plan 2 graduates are projected never to fully repay their loan — any voluntary payments made by borrowers who end up writing off the balance are simply wasted money. For Plan 5 the write-off period is 40 years, meaning a higher proportion of graduates will repay in full — but the decision still depends heavily on your expected lifetime earnings.
What happens if I never fully repay my student loan?
The balance is written off at the end of the plan's repayment period — 25 years from the April after graduation for Plan 2, 40 years for Plan 5, age 65 or 25 years for Plan 1, and 30 years for Plan 4. The written-off amount is not treated as taxable income. If you have repaid more than you borrowed (including interest), no refund is given.
Can I have two student loan plans at the same time?
Yes. Many graduates have both an undergraduate loan (Plan 1, 2, 4 or 5) and a Postgraduate Loan. Both are repaid concurrently — the undergraduate repayment at 9% above its threshold, and the postgraduate at 6% above its separate threshold. In a month where you earn above both thresholds, both deductions appear on your payslip.
Try the calculators
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