UK Student Loan Repayment Strategy (2026/27): When Overpaying Helps
UK student loan repayment strategy 2026/27: thresholds and rates by plan, write-off dates, salary sacrifice and when extra repayments may be wasted.
How UK student loans are repaid in 2026/27: the threshold, rate and write-off date for each plan, how a salary sacrifice pension reduces repayments, and why extra repayments can be money you did not need to spend. Repayments depend on income, not on how much you owe.
2026/27 plan parameters
| Plan | Who | Yearly threshold | Rate | Interest | Written off |
|---|---|---|---|---|---|
| Plan 1 | England or Wales course started before 1 September 2012; all Student Finance NI borrowers | £26,900 | 9% | Set by formula linked to RPI and Bank Rate | 25 years after the April first due if the first loan was paid on or after 1 September 2006; at age 65 if it was paid before then |
| Plan 2 | England or Wales course started 1 September 2012 to 31 July 2023 | £29,385 | 9% | Variable: RPI plus up to 3% depending on income, subject to a cap | 30 years after the April first due |
| Plan 4 | All Student Awards Agency Scotland borrowers | £33,795 | 9% | Set by formula linked to RPI and Bank Rate | 30 years after the April first due (first loan paid on or after 1 August 2007); earlier loans at 65 or 30 years, whichever is first |
| Plan 5 | England undergraduate course started on or after 1 August 2023 | £25,000 | 9% | RPI-linked | 40 years after the April first due |
| Postgraduate Loan | England or Wales master's or doctoral loan | £21,000 | 6% | RPI plus 3%, subject to a cap | 30 years after the April first due |
Interest rates change during the year; the rates currently charged are on GOV.UK. If you have more than one plan without a Postgraduate Loan, you repay one deduction on income above the lowest threshold.
Should you make extra repayments?
There is no penalty for paying early, but extra repayments cannot be refunded, and GOV.UK warns that you might not benefit because the loan is written off at the end of its term. The question to answer first is whether you would clear the balance before the write-off date on your plan's normal repayments. If you would not, any extra payment reduces a debt that would otherwise be cancelled. If you would, extra repayments save interest, and the comparison is with what else that money could do.
- Check your balance and write-off date in your online account before deciding.
- Repayments depend on income, not the balance, so a larger balance does not raise your monthly deduction.
- You can choose which plan an extra repayment goes towards; otherwise SLC decides.
Salary sacrifice and student loan repayments
HMRC tells employers to work out student loan deductions on the same gross pay used for employer Class 1 National Insurance (HMRC). A salary sacrifice lowers that pay, so it lowers the repayment. On £40,000 on Plan 2: (£40,000 - £29,385) x 9% = about £955 a year. After a £5,000 sacrifice: (£35,000 - £29,385) x 9% = about £505, a saving of £450. These are yearly figures; payroll uses the monthly or weekly threshold, so the actual deductions can differ by a few pounds.
Related guides
- UK Plan 5 Student Loan 2026/27 - new English starters detail.
- Student Loan Calculator - calculate your monthly deduction.
- UK Salary Sacrifice Pension 2026/27 - reduce student loan deduction.
- UK Emergency Fund Target 2026/27 - building a cash buffer.
- UK Pension Auto-Enrolment 2026/27 - employer contributions.
Frequently asked questions
How is the student loan deducted from my pay?
If you are employed, your employer deducts 9% of pay above your plan's threshold (6% for a Postgraduate Loan) each payday, using the weekly or monthly threshold. A bonus can therefore trigger a deduction in one month even if your yearly income ends up below the yearly threshold; you can ask for a refund after the tax year ends. If you file Self Assessment, HMRC works out the repayment from your income for the whole year. If you move abroad for more than 3 months you must tell the Student Loans Company, and repayments are set using thresholds for the country you live in.
Should I overpay my student loan?
GOV.UK warns that you might not benefit from extra repayments because the loan is written off at the end of its term, and extra repayments cannot be refunded. If your balance would be written off before you clear it, money paid early reduces a debt that would have been cancelled anyway. Whether you will clear it depends on your balance, your future income and the interest rate, so there is no single salary at which overpaying starts to pay. GOV.UK suggests speaking to a financial adviser if you are unsure.
How does Plan 2 interest work?
Plan 2 uses a variable rate. While you study it is usually RPI plus 3%; after you leave it depends on your income, rising from RPI at or below the repayment threshold to RPI plus 3% at the upper income threshold, subject to a cap. Interest is added from the day the first payment is made, and keeps being added when your income is below the threshold. The rates and income bands in force are on GOV.UK.
How does Plan 5 differ from Plan 2?
Plan 5 applies to England undergraduates who started on or after 1 August 2023. Its 2026/27 threshold is £25,000 against £29,385 for Plan 2, so repayments start at a lower income, and it is written off after 40 years rather than 30. Its interest is linked to RPI without the income-based addition that Plan 2 has.
Does pension salary sacrifice reduce student loan repayments?
Yes. Employers work out student loan deductions on the same gross pay used for Class 1 National Insurance, and pay given up under a salary sacrifice is not part of it. On a £40,000 salary on Plan 2, yearly repayments are about £955; sacrificing £5,000 into a pension cuts them to about £505, saving £450. A pension paid by net pay or relief at source does not reduce the pay used for the deduction. See our salary sacrifice pension guide.
What happens in a career break or a low-earning year?
Repayments stop automatically if you stop working or your income goes below the threshold. Interest is still added to the balance in that time. Student loans do not appear on credit reports and do not affect your credit score, although lenders may take them into account in affordability checks, for example for a mortgage.
What happens to the loan if I die?
The Student Loans Company cancels the loan. Someone needs to tell SLC and send evidence, such as the original death certificate, with the borrower's customer reference number. SLC may also cancel a loan if you can no longer work because of illness or disability and claim certain disability benefits; you need to send evidence such as a letter from the benefits agency.