Student Loan Repayments in Summer 2026: Plan 2, 4, 5 and PGL Guide

Quick answer

Student loan repayments in 2026/27 are deducted automatically through PAYE at 9% of earnings above your plan threshold (or 6% for Postgraduate Loans). For most borrowers, the headline figure of how much you owe is largely irrelevant — what matters is how much you'll repay before the loan is written off.

For the majority of Plan 2 borrowers on average UK salaries, the write-off at 30 years is the realistic outcome. Overpaying is almost always a poor financial decision.

Repayment thresholds 2026/27

Monthly and weekly equivalents for Plan 2

• Annual threshold: £29,385
• Monthly: £2,449
• Weekly: £565

If you earn £35,000/yr, your annual repayment = 9% × (£35,000 − £29,385) = 9% × £5,615 = £505/yr = £42/mo.

How repayments are collected

For employees, student loan repayments are collected through PAYE alongside income tax and National Insurance. Your employer deducts the correct amount based on your gross monthly pay and your declared plan type (from your P45 or starter checklist).

You will see the deduction as "Student Loan" on your payslip. You do not separately manage the repayment.

For self-employed borrowers, repayments are calculated and paid as part of your Self Assessment return each January, based on your annual profits.

The overpayment question: should you clear your student loan?

This is the most common question — and for most Plan 2 borrowers, the answer is no.

Why overpaying usually doesn't help

The student loan system functions as a graduate tax with a write-off cliff. Unless you earn enough to repay the full balance before the write-off date, every voluntary overpayment is money you are spending unnecessarily — the unpaid remainder disappears regardless.

Worked example: Sam, Plan 2, £35,000 salary

• Plan 2 debt: £45,000 (typical for 3-year course 2018–2021, with interest accrued).
• Annual repayment at £35,000 salary: £505.
• Estimated salary growth: 3%/yr.
• Interest rate on Plan 2: RPI + 3% while studying, RPI only once earning below the threshold, up to RPI + 3% above.

At 3% annual pay growth, Sam's salary rises from £35,000 to approximately £48,000 over 30 years. Repayments over 30 years total roughly £30,000–£35,000 in nominal terms. The original £45,000 debt (with accrued interest) may have grown to £70,000+ by write-off — most of which is written off.

If Sam made a lump-sum overpayment of £10,000 today, they would reduce the written-off amount by £10,000 — money that was going to disappear for free. The overpayment has negative expected value.

When overpaying might make sense

Overpaying only makes financial sense if you are certain you will repay the full balance before the write-off date. This typically applies to:

• Doctors, lawyers, City professionals earning £80,000+ throughout their careers.
• People who received very low loans (e.g. part-time, short courses, means-tested awards) and have a small balance.
• High earners who want to use PAYE headroom more efficiently.

If your total debt is £15,000 and you earn £70,000, you might clear it in 5–7 years — overpaying to clear it sooner is a reasonable choice (you save interest). But if your debt is £50,000 and your salary is average, leave it alone.

Plan 5: the new 40-year trap

Plan 5 applies to students who started undergraduate courses in England from August 2023 onwards. Key differences from Plan 2:

The lower threshold means Plan 5 borrowers start repaying at a lower salary — approximately £2,000/yr less than Plan 2. The 40-year write-off is significantly longer and means more borrowers will repay in full.

For a student graduating in summer 2026 on Plan 5, the write-off occurs in 2057 at the earliest. At current debt levels and projected salary profiles, many Plan 5 borrowers may actually repay their full loan — unlike most Plan 2 borrowers. This makes the overpayment calculation more nuanced for Plan 5.

Plan 4: Scottish students

Plan 4 borrowers benefit from the highest threshold in the UK at £33,795/yr. Below this level, nothing is deducted regardless of the loan balance. This means a Scottish graduate earning £33,000 pays nothing toward their loan — effectively the same as being below threshold.

Above £33,795, the 9% rate applies as normal.

Having two loans simultaneously

If you have a Postgraduate Loan in addition to an undergraduate loan, both are deducted:

• Undergraduate plan (Plan 2 or 4): 9% above threshold.
• Postgraduate Loan: 6% above £21,000.

Example: Plan 2 borrower earning £40,000 with PGL

• Plan 2 deduction: 9% × (£40,000 − £29,385) = 9% × £10,615 = £955/yr.
• PGL deduction: 6% × (£40,000 − £21,000) = 6% × £19,000 = £1,140/yr.
• Total student loan deductions: £2,095/yr = £175/mo.

Summer 2026 graduates: what to do now

Step 1: Confirm your loan plan type.

Check with Student Finance England (or SAAS for Scotland) which plan you are on. It determines your threshold. Plans 2 and 5 are the most common for recent English graduates. Do not assume — the wrong plan code on payroll leads to incorrect deductions.

Step 2: Do not make repayments before April 2027.

Repayments for 2026 graduates start April 2027. If a new employer asks you to complete a starter checklist and you select "ongoing student loan", they will start deducting immediately — before you are actually liable. If you are a new 2026 graduate, answer the student loan question carefully (select the box that says repayment has not yet started).

Step 3: Register for online student loan account.

At studentloans.co.uk you can view your current balance, repayments to date, and projected write-off date. Knowing whether you are on track to repay in full helps you decide whether any overpayments ever make sense.

Step 4: Do not make manual lump-sum payments unless you have checked the maths.

Voluntary overpayments to SLC are one-way — you cannot get them back. Before paying anything voluntarily, use the SLC repayment calculator to confirm whether you would actually clear the debt before write-off.

Student loans and mortgages

Student loan repayments reduce your take-home pay and thus affect mortgage affordability calculations (lenders look at net income or disposable income). However, the loan itself does not appear on your credit file and does not affect your credit score.

When a mortgage lender assesses affordability, they may factor in the ongoing monthly deduction — effectively treating it like a regular bill. A borrower on Plan 2 earning £35,000 has roughly £42/mo deducted, which marginally reduces the mortgage amount they can borrow.

Student loans are not a barrier to getting a mortgage. They are simply one more monthly deduction that affects disposable income in lenders' affordability models.

Key contacts

• Student Loans Company: studentloans.co.uk | 0300 100 0611
• Student Finance England: studentfinance.direct.gov.uk
• Student Awards Agency Scotland (SAAS): saas.gov.uk
• HMRC PAYE queries: 0300 200 3300

Sources

• Student Loans Company: Repayment thresholds 2026/27
• gov.uk: Student loan repayment
• IFS: Higher education funding in England
• gov.uk: Student loan write-off rules