UK Student Loan Repayment Guide
UK student loans are unlike any other form of debt. They're collected through your payslip like a tax, they're written off after a set period regardless of the balance, and they don't appear on your credit report. Understanding how your student loan works can save you money and help you make better financial decisions — particularly around whether to make voluntary overpayments.
The Five Student Loan Plans
Plan 1
Plan 1 applies if you started your course in England or Wales before 1 September 2012, or if you studied in Northern Ireland at any time. Key features:
- Threshold: £26,900/year (2026/27)
- Rate: 9% of income above threshold
- Interest: The lower of RPI or Bank of England base rate + 1%
- Write-off: Age 65, or 25 years after the first April after you left your course
Plan 2
Plan 2 covers courses starting in England or Wales from 1 September 2012 to 31 July 2023. This is the most common plan for current graduates in their 20s and 30s:
- Threshold: £29,385/year (2026/27)
- Rate: 9% of income above threshold
- Interest: RPI while studying; after graduation, RPI to RPI + 3% depending on income
- Write-off: 30 years after the first April after you left your course
Plan 2's interest rate is income-linked after graduation: at the Plan 2 threshold, interest equals RPI. At £49,130+, interest is RPI + 3%. The rate scales linearly between these points.
Plan 4
Plan 4 applies to Scottish students:
- Threshold: £33,795/year (2026/27) — the highest of all plans
- Rate: 9% of income above threshold
- Interest: The lower of RPI or Bank of England base rate + 1% (same as Plan 1)
- Write-off: 30 years after the first April after you left your course (pre-2007 loans: age 65)
Plan 5
Plan 5 is the newest plan, covering courses starting from 1 August 2023 in England:
- Threshold: £25,000/year (2026/27) — the lowest undergraduate threshold
- Rate: 9% of income above threshold
- Interest: RPI only (no additional margin)
- Write-off: 40 years after the first April after you left your course — the longest write-off period
Plan 5 is designed so more borrowers repay their loan in full. The lower threshold means repayments start earlier, the RPI-only interest means the balance doesn't grow in real terms, and the 40-year write-off gives more time to repay. However, most analysis suggests a significant proportion of Plan 5 borrowers will still not repay in full.
Postgraduate Loan
- Threshold: £21,000/year (2026/27)
- Rate: 6% of income above threshold (lower than undergraduate plans)
- Interest: RPI + 3% while studying; income-linked after
- Write-off: 30 years
- Maximum loan: £12,167 for Master's, £28,985 for Doctoral
Postgraduate Loans are deducted alongside undergraduate loans — if you have both, both are taken from your salary simultaneously. The combined deduction can be significant.
Repayment Comparison Table
| Plan 1 | Plan 2 | Plan 4 | Plan 5 | Postgrad | |
|---|---|---|---|---|---|
| Threshold | £26,900 | £29,385 | £33,795 | £25,000 | £21,000 |
| Rate | 9% | 9% | 9% | 9% | 6% |
| Interest | Low | Up to RPI+3% | Low | RPI only | Up to RPI+3% |
| Write-off | 25 yrs/age 65 | 30 years | 30 years | 40 years | 30 years |
| Repay on £35k | £729/yr | £505/yr | £108/yr | £900/yr | £840/yr |
| Repay on £50k | £2,079/yr | £1,855/yr | £1,458/yr | £2,250/yr | £1,740/yr |
Should You Overpay Your Student Loan?
This is one of the most common financial questions for UK graduates. The answer depends on whether you'll repay the full balance before it's written off:
Don't overpay if:
- Your projected total repayments over the loan term are less than your outstanding balance. Any overpayment reduces a balance that would have been written off — you lose money.
- You're on Plan 2 with an average salary. Government estimates suggest ~70% of Plan 2 borrowers won't repay in full.
- The money could be better used elsewhere: paying off higher-interest debt, building an emergency fund, or contributing to a pension (which gives you tax relief).
Do overpay if:
- You're a high earner who will clearly repay the full balance before write-off. In this case, overpaying saves you interest.
- You're on Plan 1 or Plan 4 with a small remaining balance. With low interest rates and relatively low balances, repaying early can make financial sense.
- You're close to repaying in full and the interest is significant (particularly on Plan 2 where interest can be RPI + 3%).
The Break-Even Calculation
To determine whether overpaying makes sense, estimate your total lifetime repayments. If your salary grows at 3% per year and you're on Plan 2 with £50,000 outstanding:
- Starting salary £30,000 → likely won't repay in full → don't overpay.
- Starting salary £50,000 → will likely repay in full → consider overpaying.
- Starting salary £35,000 → borderline → run the numbers with a student loan forecasting tool.
Student Loans and Mortgages
Student loans don't appear on your credit report, but lenders can see the deductions on your payslip and factor them into affordability calculations:
- Most lenders treat student loan repayments as a committed expenditure, reducing the amount they'll lend you.
- A £200/month student loan deduction could reduce your maximum mortgage by £35,000–£45,000.
- Some lenders are more generous than others — a broker can help find lenders with favourable student loan treatment.
Calculators
- Student Loan Calculator — Calculate your repayments
- Salary Calculator — See student loan impact on take-home pay
- Take-Home Pay Calculator — Full breakdown with student loan