UK Student Loan Plans Explained — Plans 1, 2, 4, 5, and Postgraduate

If you went to a UK university any time since 1998 you almost certainly have a student loan — and almost certainly don’t know which plan you’re on, when you’ll stop paying, or whether you should overpay. This guide walks through the current plans and what each one actually costs.

Which plan am I on?

It depends on where and when you started.

Plan	Who’s on it	Started
Plan 1	Pre-2012 England/Wales + any NI	Before Sept 2012 (Eng/Wales) or any time (NI)
Plan 2	Post-2012 England/Wales	Sept 2012 – Aug 2023 in Eng/Wales
Plan 4	Scotland	Any time in Scotland
Plan 5	Post-Aug-2023 England	From Aug 2023 in England
Postgraduate	Master’s or PhD loans	Any (Eng/Wales/NI)

You can check your plan via your Student Loans Company account.

Important: if you have both an undergrad loan and a Postgraduate Loan (e.g. Plan 2 + PGL), they’re repaid simultaneously — you’ll see two deductions on your payslip.

Thresholds and rates for 2026/27

Plan	Threshold	Rate
Plan 1	£26,900	9%
Plan 2	£29,385	9%
Plan 4	£33,795	9%
Plan 5	£25,000	9%
Postgraduate	£21,000	6%

Repayments kick in only on earnings above your threshold. If you earn £30,000 on Plan 2, you repay 9% of (£30,000 − £29,385) = £55.35/year (about £4.61/month).

How the payment gets collected

Through PAYE, automatically. Your employer deducts it from your salary and pays it straight to the Student Loans Company — it doesn’t reduce your taxable income, and you never handle the money yourself.

For the self-employed, repayments are calculated via Self Assessment and paid as part of your annual tax bill on 31 January.

If you have multiple jobs, each one calculates repayment independently — but each one uses the full threshold. This can mean someone with two jobs pays less student loan than someone with one equivalent-sized job. E.g. two £20k jobs below Plan 2’s £29,385 pay nothing; one £40k job pays £955/year.

Interest rates

This is where plans diverge sharply.

Plan 1 — Low fixed interest

Interest is the lower of: (a) the Bank of England base rate + 1% or (b) RPI inflation. Typically this runs at 4–6%. A “cheap” plan as loans go.

Plan 2 — Tiered interest

While studying: RPI + 3% (punishing, accumulates fast). After graduating, if your income is:

• Under £28,470: RPI only.
• Between threshold and £51,245: RPI + 0–3% (tapered).
• Over £51,245: RPI + 3%.

Plan 2 loans grow fast and most graduates will never fully repay — the loan is written off 30 years after the April you first became liable for repayment.

Plan 4 — RPI + 1%

Simpler tiered structure. Plan 4 loans have higher thresholds but slightly higher interest than Plan 1.

Plan 5 — RPI only

The big change for post-2023 English students: interest is just RPI, not RPI + 3%. This means the loan grows with inflation but doesn’t compound real interest. Combined with a 40-year write-off term, Plan 5 borrowers are more likely to repay in full than Plan 2.

Postgraduate — RPI + 3%

Always at RPI + 3%, regardless of income.

Write-off terms

• Plan 1: age 65 or 25 years after loan became repayable (whichever first).
• Plan 2: 30 years after loan became repayable.
• Plan 4: 30 years after April 2027 or age 65 or 30 years post-graduation.
• Plan 5: 40 years after loan became repayable.
• Postgraduate: 30 years after April 2020 / date of loan repayment trigger.

For Plan 2 and Plan 5 borrowers on average graduate wages, the write-off is real and meaningful — many will never fully repay. Plan 5’s 40-year term was a deliberate policy shift to push more of the cost onto the borrower.

Worked example: £35,000 salary on Plan 2

• Threshold: £28,470
• Earnings above threshold: £35,000 − £28,470 = £6,530
• Annual repayment: £6,530 × 9% = £587.70
• Monthly deduction: £48.98
• Effective “extra tax” rate: 9% on anything over £28,470

For someone earning up to £51,000, Plan 2 is effectively a 9% tax surcharge on earnings above the threshold. At a total marginal of 20% IT + 8% NI + 9% student loan = 37% at the margin, vs 28% for someone without student debt.

Try your own numbers at our student loan calculator.

Should you overpay?

The conventional advice for Plan 2 is: don’t overpay. Here’s why:

1. Interest rate is RPI + 3% — similar to a mortgage, but with a 30-year ticking clock after which the balance disappears.
2. If you’re unlikely to ever repay in full, any overpayment is pure waste — money you could have saved, invested, or spent.
3. The “regret calculation”: only overpay if you’re confident you’ll earn consistently above the threshold for a long time — i.e. you will repay in full.

For Plan 1 (lower interest), overpayment is less clearly wasteful but still rarely optimal if you have mortgage debt or are missing out on employer pension match.

For Plan 5 (RPI only, 40-year term): overpayment is even less likely to be worthwhile than Plan 2 — the absence of compound real interest means the “wait and let it write off” strategy is more attractive.

The Money Saving Expert calculator is the best tool for a personalised answer: moneysavingexpert.com/students.

Common misconceptions

• “It’s a debt like any other”: it’s more like a graduate tax with a built-in cap. You only pay when you earn above the threshold.
• “It’ll hurt my mortgage application”: lenders look at your affordability factoring the deduction in — it’s built into your DTI calculation.
• “I should clear it fast”: for Plan 2 and Plan 5, usually no — see overpayment section above.
• “Marriage / partnership affects it”: no — your spouse’s income is irrelevant for student loan repayment calculations.
• “I can skip repayment by going self-employed”: no — Self Assessment recalculates it.

What happens if I move abroad?

You must notify the Student Loans Company within 3 months of moving abroad for more than 3 months. They’ll recalculate your minimum payment based on the country’s cost of living — for a low-income country you pay nothing; for the US you pay roughly the same as UK calculations.

Failing to notify SLC can mean penalty interest and default flags — worth setting a reminder.

Related tools

• Student Loan Calculator — try your own salary.
• Salary Calculator — see how the loan fits into your total deductions.
• Two-Jobs Calculator — the split-employment quirk mentioned above.
• UK tax codes guide — how PAYE deductions (including your student loan) are coded on your payslip.
• Methodology — all thresholds verified against gov.uk.