Student Loan Repayments UK 2026/27: Plan 2, Plan 5 and Postgraduate Guide

The Four UK Student Loan Plans -- At a Glance

The UK operates four main student loan plans for undergraduate borrowers plus a separate Postgraduate Loan scheme. Which plan you are on depends on when and where you studied, not on the size of your loan or when you took it out.

Plan 2 in Detail -- GBP 28,470 Threshold, 30-Year Write-off

Plan 2 is the plan most commonly held by graduates who studied in England or Wales between September 2012 and July 2023. It is the largest cohort of borrowers currently in repayment.

How the threshold works: you repay 9% of everything you earn above GBP 28,470 per year. Earnings below that threshold attract zero repayment regardless of your loan balance. The threshold applies to total employment income (salary plus bonuses and taxable benefits) and self-employed profits reported through Self Assessment.

Interest on Plan 2: while studying, interest is charged at RPI plus 3%. After graduation, interest varies by income -- at or below GBP 28,470 it is RPI only; between GBP 28,470 and GBP 49,130 it scales from RPI up to RPI plus 3%; above GBP 49,130 it is RPI plus 3%. This means higher earners see their balance grow faster in the early career years if repayments do not keep pace with interest.

Write-off: 30 years after the April following the year you first became liable to repay -- typically 30 years after you left university. Any balance remaining at that date is written off automatically and is not treated as taxable income.

Plan 5 in Detail -- GBP 25,000 Threshold, 40-Year Write-off

Plan 5 applies to English students who started an undergraduate degree from 1 August 2023 onwards. The lower threshold of GBP 25,000 (compared to Plan 2's GBP 28,470) means repayments begin earlier in the salary scale -- at a salary of GBP 30,000, a Plan 5 graduate repays three times more per month than an equivalent Plan 2 graduate.

The 40-year write-off period is the most significant long-term difference from Plan 2. Modelling by the Institute for Fiscal Studies has consistently shown that Plan 5 graduates with mid-range salaries are more likely to clear their loan in full before write-off than Plan 2 graduates were -- meaning they end up repaying more of the actual loan amount rather than benefiting from partial write-off.

Interest on Plan 5: the interest structure is designed to be simpler and lower. During study, interest is charged at RPI only. After graduation, interest is capped at the lower of RPI or the Bank of England base rate plus 1%. This is a more borrower-friendly rate than Plan 2, though the longer write-off period and lower threshold still make Plan 5 more expensive in total for most mid-to-high earners.

Postgraduate Loan -- GBP 21,000 Threshold at 6%

The Postgraduate Loan covers Masters degrees, PGCEs and Doctoral loans for English and Welsh students who took out a loan from 2016 onwards. It is entirely separate from any undergraduate loan you may hold -- both are collected simultaneously if you have both.

The 6% rate on income above GBP 21,000 means the Postgraduate Loan starts biting at relatively low salary levels. At GBP 25,000 the annual Postgraduate Loan deduction is GBP 240; at GBP 35,000 it is GBP 840; at GBP 50,000 it is GBP 1,740.

Interest on the Postgraduate Loan is charged at RPI plus 3% throughout repayment. The write-off period is 30 years from the April after you left your postgraduate course.

How Multiple Plans Are Deducted Simultaneously

If you hold both an undergraduate plan and a Postgraduate Loan, your employer deducts both through PAYE in the same pay period. Each deduction is calculated independently from the same gross earnings figure -- they do not interact. Your payslip will show two separate deduction lines.

Effective Marginal Deduction Rate for Graduates

Understanding the combined effect of income tax, National Insurance and student loan repayments helps you see the true impact on take-home pay for each additional pound earned above the thresholds.

In the basic-rate band (GBP 12,571 to GBP 50,270) for a Plan 2 graduate: income tax is 20%, employee NI is 8% (between the Primary Threshold of GBP 12,570 and the Upper Earnings Limit GBP 50,270), and Plan 2 deduction is 9% on earnings above GBP 28,470. Above GBP 28,470 the combined effective marginal deduction rate is 37% (20 + 8 + 9). If you also hold a Postgraduate Loan, add 6% above GBP 21,000 -- so between GBP 28,470 and GBP 50,270 the combined rate is 43% (20 + 8 + 9 + 6).

Above the Upper Earnings Limit (GBP 50,270), employee NI drops to 2%. Above GBP 50,270 the combined rate for a Plan 2 graduate drops to approximately 56% (40% higher-rate IT + 2% NI + 9% SL) if you cross into the higher-rate band, or 30% (20 + 2 + 9 - 1 rounding) just below GBP 50,270.

These combined deduction rates do not affect your income tax liability -- student loan repayments are not tax-deductible. They simply reduce the net cash you receive each month.

How Repayments Appear on Your Payslip

Student loan deductions are processed entirely through the PAYE system. When you start a new job, you complete a Starter Checklist (or your employer uses your P45 information). If you have a student loan, you must indicate which plan type you are on -- this tells your employer which threshold to use.

HMRC also sends employer instructions (called a Student Loan Start Notice, SL1) when they become aware you should be repaying. Deductions begin from the first payday after the employer receives the SL1, or immediately on joining if you correctly declared your plan on the Starter Checklist.

On your payslip the deductions appear as:

• Student Loan Deduction (Plan 1, 2 or 5 -- labelled by plan type) -- collected by HMRC and passed to the Student Loans Company.
• Postgraduate Loan Deduction -- separately listed if applicable.

Both amounts are included in the Real Time Information (RTI) submission your employer makes to HMRC each pay period. At year-end your P60 records total student loan deductions for the year. If you are overpaid because your employer used the wrong threshold, HMRC reconciles this after the year-end and the SLC credits the overpaid amount back to your loan balance (not as a cash refund in most cases).

Total Cost at GBP 25,000 to GBP 60,000 Salary -- All Plans

The table below shows annual student loan deductions for each plan at benchmark salary levels, using 2026/27 thresholds.

Voluntary Overpayments -- When They Make Sense

You can make voluntary lump sum or regular overpayments directly to the Student Loans Company at any time. However, whether it is financially rational to do so depends entirely on whether you expect to clear the loan in full before write-off.

The income-contingent design of UK student loans means that a large proportion of borrowers -- especially those on Plan 2 with GBP 40,000 or more of debt and moderate salaries -- will see their balance written off before they clear it. In these cases, voluntary overpayments simply reduce the amount written off for free; they do not reduce your total lifetime outgoings.

Voluntary overpayment may be financially rational only if all of the following apply: your salary trajectory is high enough that you will clear the full balance well before the write-off date; the interest rate on your loan exceeds what you could earn by investing the same money elsewhere; and you have already maximised other tax-efficient savings (pension, ISA).

For most Plan 5 graduates with large balances and the 40-year write-off window, the SLC's own modelling tools are the best starting point. Enter your current balance, salary and expected salary growth to see whether your balance is falling or rising over time.

Self-Employment and Student Loan Repayments

If you are self-employed, student loan repayments are collected through your annual Self Assessment tax return rather than via PAYE. HMRC calculates the repayment based on your self-employed profits (income minus allowable expenses) above the relevant threshold.

The same thresholds and rates apply: 9% above GBP 24,990 (Plan 1), GBP 28,470 (Plan 2) or GBP 25,000 (Plan 5); 6% above GBP 21,000 (Postgraduate Loan). You pay these amounts in January (balancing payment) and July (payment on account) alongside your income tax and Class 4 NI. Unlike employees where deductions are spread monthly, self-employed graduates must budget for a lump sum repayment each January.

If you are both employed and self-employed, PAYE deductions cover your employment income and Self Assessment covers the self-employed profits. HMRC combines both to calculate any additional repayment due in Self Assessment.

Leaving the UK -- Overseas Repayments

Moving abroad does not cancel your student loan obligation. If you leave the UK for more than three months, you must notify the Student Loans Company before you go. The SLC will ask for evidence of your overseas income annually -- usually through an Overseas Income Assessment form.

Your repayment amount is calculated using the country-specific repayment threshold for the country you are living in (the SLC publishes country thresholds). You pay directly to the SLC rather than via PAYE or Self Assessment. Failing to notify the SLC or to make repayments from abroad can result in fixed monthly charges being imposed regardless of your income -- an outcome considerably worse than the income-contingent standard rate.