Guide · Tax
Student Loan Repayment in the UK: Which Plan Are You On?
UK student loans are not like conventional debt. You repay a percentage of earnings above a threshold — not a fixed monthly amount — and any balance remaining at the end of the loan term is written off. Here is what that means for your take-home pay and whether the balance actually matters.
The four repayment plans
| Plan | Who it applies to | Repayment threshold | Rate | Write-off |
|---|---|---|---|---|
| Plan 1 | Pre-2012 England/Wales; NI (any) | £24,990/yr | 9% above threshold | 25 years or age 65 |
| Plan 2 | England 2012–2022 | £28,470/yr | 9% above threshold | 30 years |
| Plan 4 | Scotland (any) | £32,745/yr | 9% above threshold | 30 years |
| Plan 5 | England from Sept 2023 | £25,000/yr | 9% above threshold | 40 years |
Thresholds are updated annually and are approximate for 2026/27. Postgraduate loans are repaid at 6% above a separate £21,000 threshold and are written off after 30 years.
What you actually pay each month
Repayments are 9% of income above the threshold — deducted from your salary alongside income tax and NI via PAYE. The balance of the loan — even £60,000+ — does not affect the monthly deduction, only your income does.
| Annual salary | Monthly deduction | Effective % of gross |
|---|---|---|
| £25,000 | £0 | 0% |
| £30,000 | £114 | 0.46% |
| £35,000 | £489 | 1.40% |
| £40,000 | £864 | 2.16% |
| £50,000 | £1,614 | 3.23% |
| £60,000 | £2,364 | 3.94% |
Monthly deduction = (Salary − £28,470) × 9% ÷ 12. Deductions stop if salary drops below the threshold — e.g. during parental leave or reduced hours.
Interest rates on student loans
Plan 5 (from September 2023) charges interest at RPI only — a significant reform from Plan 2, which charged up to RPI + 3% for higher earners while studying. Plan 1 rates are the lower of RPI or Bank of England base rate + 1%. Interest accrues throughout the loan term but is irrelevant for most borrowers who will not fully repay before write-off.
Should you think of it as debt?
For most graduates: no. A UK student loan is better understood as a graduate income tax — a percentage of income deducted at source above a threshold, with a finite repayment period and write-off. For Plan 5 borrowers with moderate earnings, the OBR estimates that more than 70% will not fully repay before write-off. For them, the loan balance is largely irrelevant — what matters is the monthly deduction's effect on take-home pay.
The exception: very high earners who will repay in full well before the write-off date. For them, the loan behaves more like conventional debt and early repayment can reduce total interest paid.
Frequently asked questions
What is the difference between Plan 1, Plan 2, Plan 4, and Plan 5?
Plan 1: started before 2012 in England/Wales (or any time in Northern Ireland). Plan 2: started 2012–2022 in England. Plan 4: started any time in Scotland. Plan 5: started September 2023 onwards in England. Each plan has different repayment thresholds, interest rates, and write-off periods. Most people starting university from 2023 in England will be on Plan 5.
When are student loans written off?
Plan 1: 25 years after the April you became eligible to repay, or when you reach 65. Plan 2: 30 years after repayment started. Plan 4: 30 years after repayment started. Plan 5: 40 years after the April you became eligible to repay (this is the longest write-off period).
Do student loans affect my credit score?
No. Student loans do not appear on your credit report and do not affect your credit score. They are collected through HMRC's tax system rather than through commercial lenders. However, mortgage lenders will ask about student loan repayments as they affect your disposable income and therefore affordability.
Is it worth overpaying or paying off a student loan early?
For most Plan 2 and Plan 5 borrowers: probably not. The majority of graduates never fully repay — the balance is written off at the end of the term. Paying extra reduces what will be written off, not what you pay while working. The exception is high earners on track to repay in full well before the write-off date — for them, reducing the interest-accruing balance can make mathematical sense.