The student loan deduction on your payslip behaves less like a debt and more like a graduate tax — yet which plan you are on, when repayments start, and whether they will ever clear are a mystery to most graduates. This 2026/27 guide explains the four undergraduate plans (Plan 1, 2, 4 and 5), the income threshold that triggers repayment, the 9% rate above it, when balances are written off after 25, 30 or 40 years, and the separate Postgraduate Loan at 6%. A worked example shows exactly what comes off your pay — and why overpaying is usually a mistake.
Which plan you are on depends on where and when you started your course — and it determines your threshold and write-off period:
Plan 1: English and Welsh students who started before September 2012, plus Northern Irish students.
Plan 2: English and Welsh students who started between September 2012 and July 2023.
Plan 4: Scottish students (its own threshold and rules).
Plan 5: English students starting from September 2023 — the newest plan, with a lower threshold and a longer 40-year write-off.
Your annual statement and the gov.uk student loan service confirm your plan. It is possible to hold more than one plan if you studied at different times.
Thresholds and the 9% Rate
On every undergraduate plan you repay 9% of income above your plan's threshold — never 9% of your whole income. Below the threshold you repay nothing.
The thresholds are reviewed each year and differ by plan. Broadly, Plan 1 and Plan 4 each have their own threshold, Plan 2 sits higher, and Plan 5 is around £25,000 — so the newest graduates start repaying sooner than earlier cohorts. Because the figures change annually, always check the current threshold for your plan on gov.uk.
Repayments only begin from the April after you finish or leave your course, and the route depends on how you earn:
Employed: deducted automatically through PAYE each pay period once you earn above the threshold, and shown on your payslip.
Self-employed: calculated on your Self Assessment return and paid with your tax bill.
One quirk: PAYE deductions are worked out per pay period, so a one-off bonus can trigger a repayment even if your annual income is below the threshold — you can reclaim over-deductions at year end if your total income stayed below it.
Write-Off Rules
Any remaining balance is cancelled after a set period — a defining feature of the system:
Plan 1: typically 25 years after you first became due to repay (or a set age for older loans).
Plan 2: 30 years after you became liable.
Plan 4: its own Scottish write-off point.
Plan 5: a longer 40-year write-off, so many will repay for most of their careers.
The loan is also written off on death. Because so many borrowers never clear the balance before write-off, the loan behaves more like a graduate tax than a conventional debt.
The Postgraduate Loan (PGL)
Master's and doctoral study can be funded by a separate Postgraduate Loan, which works differently: you repay 6% (not 9%) of income above the PGL threshold, with its own write-off period.
Crucially, the loans stack. If you hold both an undergraduate loan and a PGL, both are collected at once — so you could repay 9% above your undergraduate threshold plus 6% above the PGL threshold, a combined 15% on the overlapping slice of income. That can be a sizeable deduction for higher-earning graduates with both loans.
Should You Overpay?
For most graduates, voluntarily overpaying is a poor decision. Because repayments are income-contingent and the balance is written off, many people — especially on Plan 2 and Plan 5 — never repay the full amount, so overpaying simply hands money to the government you were never going to pay anyway.
Overpaying only makes sense if you are confident you would otherwise clear the loan in full and pay substantial interest along the way — usually only higher earners. For most, spare money is better directed to a pension, an ISA or clearing higher-interest debt first.
Worked Example: A Plan 5 Graduate on £35,000
Consider a Plan 5 graduate earning £35,000, with a repayment threshold of around £25,000. Figures are illustrative for 2026/27.
Income above the threshold: £35,000 − £25,000 = £10,000.
Repayment at 9%: £10,000 × 9% = £900 for the year, about £75 a month.
This sits on top of income tax and National Insurance on the same pay.
If they also held a Postgraduate Loan, an extra 6% above the PGL threshold would stack on top.
See the combined effect of tax, NI and the student loan deduction with the take-home pay calculator.
On the main undergraduate plans (Plan 1, 2, 4 and 5), you repay 9% of everything you earn above the repayment threshold for your plan — not 9% of your whole income. So if your plan threshold is around £25,000 and you earn £35,000, you repay 9% of the £10,000 difference, or about £900 a year. The Postgraduate Loan is different at 6%. Below the threshold you repay nothing. Because repayments are tied to income, they rise and fall with your earnings and stop automatically if your income drops below the threshold.
What are the different student loan plans?
Which plan you are on depends on where and when you started your course. Plan 1 generally covers English and Welsh students who started before September 2012 and Northern Irish students. Plan 2 covers English and Welsh students who started between September 2012 and July 2023. Plan 4 covers Scottish students. Plan 5 covers English students starting courses from September 2023 onwards. Each plan has its own repayment threshold and write-off period, so it matters which one you hold — your annual statement and the gov.uk student loan service confirm it.
What is the repayment threshold for each plan?
Each plan has a different income threshold above which the 9% repayment kicks in, and these are set each year. Broadly, Plan 1 and Plan 4 have their own thresholds, Plan 2 has a higher one, and Plan 5 (for those starting from September 2023) has a notably lower threshold of around £25,000 — meaning newer graduates start repaying sooner. Because the exact figures are reviewed annually, you should check the current threshold for your plan on gov.uk. Earn below your threshold and you repay nothing that period.
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When is a student loan written off?
Any remaining balance is written off after a set period that depends on your plan. Plan 1 is typically written off 25 years after the April you were first due to repay (or at a set age for older loans). Plan 2 is written off 30 years after you became liable to repay. Plan 4 follows Scottish rules with its own write-off point. Plan 5 — the newest — has a longer 40-year write-off period, so many Plan 5 graduates will repay for most of their working lives. The loan is also written off on death.
How are student loan repayments collected?
If you are employed, repayments are deducted automatically through PAYE, calculated on your pay each period once you earn above the threshold, and shown on your payslip. If you are self-employed or complete a Self Assessment return, repayments are calculated on your return and paid alongside your tax bill. Repayments only begin from the April after you finish or leave your course. Importantly, PAYE deductions are based on each pay period, so a one-off bonus can trigger a repayment even if your annual income is below the threshold.
What is the Postgraduate Loan (PGL)?
The Postgraduate Loan helps fund master’s and doctoral study and works differently from the undergraduate plans. You repay 6% (not 9%) of income above the Postgraduate Loan threshold, and it has its own write-off period. Crucially, if you have both an undergraduate loan and a Postgraduate Loan, the two are collected at the same time and stack: you could repay 9% above your undergraduate threshold plus 6% above the PGL threshold, so 15% of the overlapping slice of income. This can be a meaningful deduction for higher-earning graduates with both loans.
Should I pay off my student loan early?
For most graduates, no — and it can be a poor financial decision. Because repayments are income-contingent and the balance is written off after 25, 30 or 40 years, many people never repay the full amount, especially on Plan 2 and Plan 5. Voluntarily overpaying only helps if you are confident you would otherwise clear the loan in full and pay substantial interest. For most borrowers the loan behaves more like a graduate tax than a conventional debt, and money is usually better directed to a pension, an ISA or higher-interest debt. Model your own position before overpaying.
Does interest accrue on a student loan?
Yes. Interest is added to your balance from the day the loan is paid out, at a rate that varies by plan and, on some plans, by your income — typically linked to inflation (RPI), sometimes plus a margin. However, because repayments depend on income rather than the balance, the interest rate often makes little practical difference to what you actually repay if you are unlikely to clear the loan before write-off. For graduates who will repay in full — usually higher earners — the interest rate matters much more, as it determines the total cost.
Does a student loan affect my credit score or mortgage?
A student loan does not appear on your credit file and does not directly affect your credit score. However, the monthly repayment reduces your take-home pay, so a mortgage lender will take it into account when assessing affordability — much like any other regular deduction. It is the cash-flow impact, not a black mark on your credit record, that matters. Being honest about your student loan repayment on a mortgage application is important, as lenders factor it into how much they will lend.
What happens to my student loan if I move abroad?
Your obligation to repay continues if you move abroad, but the mechanism changes. You must tell the Student Loans Company before you leave, and you repay based on the income threshold for the country you move to (adjusted for living costs), paying directly rather than through UK PAYE. Failing to keep the Student Loans Company informed can lead to fixed monthly repayments at a penalty level and added interest. If you return to the UK, repayments revert to the normal PAYE or Self Assessment route.
Disclaimer: This guide reflects 2026/27 UK student loan rules. Repayment thresholds, interest rates, plan eligibility and write-off periods change over time and differ across the UK nations. Your own plan and figures are personal. Check your plan and the current thresholds on gov.uk and the Student Loans Company before making decisions about overpaying.