Student Loan Repayment Thresholds 2026/27: Plans 1-5 Compared

Why There Are Five Different Loan Plans

If you studied in the UK at different times, or in different parts of the country, you may be on a different student loan plan from a friend who studied at the same university. The plan you are on depends on when and where you started your course, not on which institution you attended.

The UK's student loan system has been reformed several times since income-contingent repayment was introduced in 1998, each reform creating a new plan running alongside existing ones. Understanding which plan you are on is not merely academic — the differences in threshold, interest rate and write-off period can amount to tens of thousands of pounds over a career.

In 2026/27 there are five plans in operation, plus the Postgraduate Loan scheme for Master's and doctoral borrowers. Here is the complete picture.

All Five Plans Compared: 2026/27

The threshold figures above apply for the 2026/27 tax year (6 April 2026 to 5 April 2027). Thresholds are typically reviewed annually.

How Repayments Are Collected

For employees, student loan repayments are collected automatically through the PAYE system alongside income tax and National Insurance contributions. Your employer deducts the appropriate amount from your gross pay and sends it to HMRC. You do not need to do anything once your employer has been notified that you have a student loan, which happens automatically when your loan enters repayment.

If you are self-employed, you declare your student loan repayments as part of your annual Self Assessment tax return. HMRC calculates the amount owed based on your taxable income for the year. Self-employed borrowers should budget for these payments rather than waiting for an end-of-year bill.

If you earn below the threshold for your plan, no repayment is taken. There is no minimum payment and no penalty for earning below the threshold.

Holding Multiple Plans Simultaneously

It is possible — and increasingly common — to hold loans under two different plan types at the same time. A borrower who took an undergraduate Plan 2 loan and then took a Postgraduate Loan would have both active simultaneously.

HMRC calculates each deduction independently, applying the appropriate threshold and rate to each plan separately. Both deductions then appear on your payslip as combined student loan deductions, though they may be shown separately depending on your employer's payroll software. The total deduction can therefore be significant for higher earners with large combined balances.

Interest Rate Detail by Plan

Plan 1 and Plan 4: Interest accrues at the lower of the Bank of England base rate plus 1% or the Retail Price Index (RPI). This is a relatively low rate and in some periods (particularly when the base rate was near zero) resulted in very modest interest accrual.

Plan 2: The interest rate is income-linked and more complex. While studying, and for a period after graduating before earnings reach the threshold, interest accrues at RPI+3%. Once earnings reach the repayment threshold (£27,295), the rate is RPI only. As earnings rise above the threshold towards a higher income point (£49,130 in recent years), the rate increases linearly from RPI up to RPI+3%. Above that upper earnings point, interest accrues at the maximum RPI+3%. This means a borrower who earns just above the threshold pays less interest on their outstanding balance than one who earns significantly more.

Plan 5: The Government deliberately simplified the interest rate for Plan 5. It is set at RPI only — there is no income-linked surcharge and no RPI+3% maximum. This makes Plan 5 interest lower over the life of the loan for most borrowers compared with Plan 2, despite the longer 40-year write-off period.

Postgraduate Loan: Interest accrues at RPI+3% throughout, regardless of income. This is the highest rate of any plan.

Plan 5: The Key Differences

Plan 5 was introduced for students starting English or Welsh undergraduate courses from August 2023. It was designed to make the system more financially sustainable and to ensure a higher proportion of borrowers repay their loans in full. The key differences from Plan 2 are:

• The threshold is lower: £25,000 compared to £27,295 (meaning repayments begin at a lower income)
• The write-off period is longer: 40 years rather than 30 years
• The interest rate is simpler: RPI only, with no surcharge

The longer write-off period means that more borrowers are expected to repay in full before write-off, since their balance has more time to be eroded. The lower threshold accelerates the pace of repayment. The removal of the interest rate surcharge partially compensates for these changes in terms of total amount repaid.

Impact on Take-Home Pay: Worked Examples

The table below shows approximate monthly student loan deductions for Plan 2 and Plan 5 borrowers at various income levels in 2026/27.

Plan 5 deductions are higher at every income level shown because the threshold is lower (£25,000 vs £27,295). The difference narrows slightly at higher incomes as a proportion of pay. These figures are approximate and based on annual salary converted to a monthly equivalent.

Should You Make Voluntary Overpayments?

This is a question many borrowers ask, particularly those who receive a windfall or start earning more than expected. For most Plan 2 and Plan 5 borrowers, the answer is no — voluntary overpayments are unlikely to be financially beneficial.

The reason is the write-off provision. If there is a meaningful probability that your outstanding balance will be written off before you repay it in full (because your earnings over 30 or 40 years are simply not high enough to clear the total), then every pound you voluntarily overpay is a pound you may have paid unnecessarily. You will have reduced the balance, but the debt would have been cancelled for free at write-off anyway.

Plan 1 borrowers who are approaching the write-off age of 65, or who are within a few years of the 25-year write-off limit, are in a different position. If their outstanding balance is relatively small, targeted overpayments may eliminate the debt before further interest accrues.

Always seek independent financial advice before making large voluntary overpayments.

Tax Interaction

It is worth noting that student loan deductions are calculated on your earnings after income tax and National Insurance have been assessed, but before other voluntary deductions such as pension contributions (for salary sacrifice arrangements the position is slightly different). Student loan repayments are not tax-deductible — you cannot offset them against your income tax liability. They are simply a deduction from your take-home pay that reduces your net income.