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.

This guide covers every active student loan plan for the 2026/27 tax year, with worked examples showing exactly how much you'll repay at different salary levels. Whether you're a recent graduate trying to understand your first payslip or an experienced professional weighing up early repayment, you'll find the answers here.

How Student Loan Repayments Work

Student loan repayments in the UK are collected through the PAYE system, the same mechanism your employer uses to deduct income tax and National Insurance. Your employer calculates the deduction each pay period and sends it to HMRC, who then passes it to the Student Loans Company (SLC). You do not need to set up a direct debit or make manual payments while you are employed.

The key principle is simple: you only repay when you earn above your plan's repayment threshold, and only on the income above that threshold. If your earnings drop below the threshold (for example, during a career break, period of unemployment, or maternity leave) your repayments stop automatically. There is no penalty for pausing repayments, and no minimum payment requirement.

If you're self-employed, student loan repayments are calculated and paid through your Self Assessment tax return instead of PAYE. The same thresholds and rates apply, but you'll pay in a lump sum alongside your income tax.

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:

Plan 1 loans typically carry the lowest interest rates of any plan, often sitting below general inflation. Because many Plan 1 borrowers took out relatively small loans (tuition fees were capped at around £3,000 per year), a significant number will repay in full before the write-off date, particularly those on higher salaries. If your remaining balance is small, it may be worth checking whether early repayment saves you money overall.

Worked example: On a salary of £40,000, your annual Plan 1 repayment would be 9% x (£40,000 - £26,900) = 9% x £13,100 = £1,179 per year, or roughly £98 per month. Use the student loan calculator to see your exact figure.

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:

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 2 is where the overpayment question is most contentious. With tuition fees of up to £9,250 per year plus maintenance loans, many graduates leave university with balances of £50,000 to £60,000 or more. The RPI + 3% interest rate for higher earners can mean the balance grows faster than it's repaid in the early years. However, because the loan is written off after 30 years regardless of the remaining balance, most Plan 2 borrowers will never repay in full; the government's own modelling suggests roughly 70% of Plan 2 borrowers will see their remaining balance written off.

Worked example: On a salary of £35,000, your annual Plan 2 repayment would be 9% x (£35,000 - £29,385) = 9% x £5,615 = £505 per year, or about £42 per month. On a salary of £60,000, the figure rises to 9% x £30,615 = £2,755 per year, or approximately £230 per month. You can see the full breakdown, including the impact on your take-home pay, using our calculators.

Plan 4

Plan 4 applies to Scottish students:

Scottish students benefit from the highest repayment threshold of any undergraduate plan, meaning repayments don't begin until earnings exceed £33,795. Combined with lower tuition fees in Scotland (currently £1,820 per year for Scottish domiciled students at Scottish universities), Plan 4 borrowers typically have both lower balances and lower monthly repayments than their English counterparts. The low interest rate (matching Plan 1) means the balance doesn't grow rapidly.

Worked example: On a salary of £40,000, your annual Plan 4 repayment would be 9% x (£40,000 - £33,795) = 9% x £6,205 = £558 per year, or about £47 per month. Compare that with £1,179 per year on Plan 1 for the same salary, as the higher threshold makes a significant difference.

Plan 5

Plan 5 is the newest plan, covering courses starting from 1 August 2023 in England:

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.

The shift from Plan 2 to Plan 5 represents a significant policy change. While Plan 2 charged higher interest but wrote off loans sooner, Plan 5 charges lower interest but extends the repayment window by a decade. In practical terms, a Plan 5 borrower earning a median salary will make monthly repayments for most of their working life, potentially from their mid-20s until their early 60s. The lower threshold of £25,000 also means that graduates in lower-paid roles will start repaying sooner than they would have under Plan 2.

Worked example: On a salary of £30,000, your annual Plan 5 repayment would be 9% x (£30,000 - £25,000) = 9% x £5,000 = £450 per year, or £37.50 per month. Under Plan 2, you would repay nothing at all on this salary because £30,000 is below the Plan 2 threshold of £29,385. This illustrates how Plan 5's lower threshold captures more earners.

Postgraduate Loan

Postgraduate Loans are deducted alongside undergraduate loans; if you have both, both are taken from your salary simultaneously. The combined deduction can be significant.

Worked example, dual loans: Consider a graduate on £45,000 with both a Plan 2 undergraduate loan and a Postgraduate Loan. Their undergraduate repayment is 9% x (£45,000 - £29,385) = £1,405 per year. Their postgraduate repayment is 6% x (£45,000 - £21,000) = £1,440 per year. The combined student loan deduction is £2,845 per year, or roughly £237 per month. This sits on top of income tax and National Insurance, and can come as a surprise on your first payslip. Use the salary calculator to see the full picture.

Repayment Comparison Table

Plan 1Plan 2Plan 4Plan 5Postgrad
Threshold£26,900£29,385£33,795£25,000£21,000
Rate9%9%9%9%6%
InterestLowUp to RPI+3%LowRPI onlyUp to RPI+3%
Write-off25 yrs/age 6530 years30 years40 years30 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

Note that the "Repay on £35k" and "Repay on £50k" rows show annual repayments only, not the total cost of the loan. The total amount you repay over the full loan term depends on your salary trajectory, interest rates, and whether the loan is written off before you finish repaying.

How Repayments Are Calculated Each Pay Period

Your employer calculates student loan deductions on a per-pay-period basis, not on your annual salary. For monthly-paid employees, the annual threshold is divided by 12. For weekly-paid employees, it's divided by 52. This matters because of how rounding works and because your earnings may vary from month to month if you receive overtime, commission, or bonuses.

Monthly calculation for Plan 2: The annual threshold of £29,385 becomes £2,448.75 per month (£29,385 / 12). If your gross monthly pay is £3,500, your student loan deduction that month is 9% x (£3,500 - £2,448.75) = 9% x £1,051.25 = £94.61. HMRC rounds down to the nearest pound in each pay period, so the actual deduction would be £94.

Impact of bonuses: If you receive a £5,000 bonus in a particular month, your student loan repayment for that month will be significantly higher because the bonus pushes your monthly earnings well above the threshold. For example, if your normal monthly salary is £3,000 and you receive a £5,000 bonus, your total pay that month is £8,000. The Plan 2 deduction would be 9% x (£8,000 - £2,448.75) = £499.61 for that month alone. You can model this scenario with the bonus calculator.

Common Mistakes and Misunderstandings

Mistake 1: Thinking you repay 9% of your entire salary

This is the most widespread misconception. You only repay 9% of income above the threshold, not 9% of your total salary. On a £35,000 salary with Plan 2, you repay 9% of £5,615 (the amount above £29,385), which is £505 per year. You do not repay 9% of £35,000 (which would be £3,150).

Mistake 2: Treating student loan repayments as "real" debt

Unlike a mortgage or personal loan, student loans don't affect your credit score, can't lead to debt collection if you don't earn enough to repay, and are automatically written off. Treating them like conventional debt can lead to poor financial decisions, such as prioritising overpayments over building an emergency fund or paying off high-interest credit card debt.

Mistake 3: Not checking your plan type

Your payslip should show which plan you're on, but mistakes do happen. If your employer has you on the wrong plan, you could be overpaying or underpaying. You can verify your plan type by logging in to your Student Loans Company account or checking your tax code letter from HMRC. Plan types are indicated by suffixes on your tax code or by a separate SLC notification letter.

Mistake 4: Continuing to repay after the loan is cleared

If you fully repay your student loan, there can be a delay of a few weeks before the SLC notifies HMRC and your employer. During this period, your employer may continue deducting student loan repayments. Any overpayment will be refunded by the SLC, but it can take time. If you're close to repaying in full, consider contacting the SLC directly to arrange final payment and prevent over-deduction.

Mistake 5: Ignoring student loans when negotiating salary

Because student loan repayments are percentage-based above a threshold, a pay rise has a different net value depending on your plan. For every additional £1,000 of gross salary above your threshold, you'll lose £90 to student loan repayments (on undergraduate plans) on top of income tax and National Insurance. On a basic-rate salary with Plan 2 and National Insurance, the marginal deduction rate on each additional pound is 20% (tax) + 8% (NI) + 9% (student loan) = 37%. Use the take-home pay calculator to see exactly what a pay rise is worth after all deductions.

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:

Do overpay if:

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:

A practical example: Suppose you're on Plan 2 with a £45,000 balance and you earn £55,000. Your annual repayment is 9% x (£55,000 - £29,385) = £2,305. Over 30 years, with 3% annual salary growth and assuming RPI at 3%, your total repayments would comfortably exceed your outstanding balance, meaning you'd repay in full well before the write-off date. In this scenario, making voluntary overpayments reduces the interest you pay and could save thousands of pounds. However, if your starting salary were £32,000, the same calculation shows you'd likely never clear the balance, and overpayments would be money lost.

Student Loans and Pension Contributions

One frequently overlooked strategy involves salary sacrifice pension contributions. If your employer offers salary sacrifice, your pension contribution is deducted from your gross salary before student loan repayments are calculated. This means increasing your pension contribution reduces your student loan deduction.

Example: On a £40,000 salary with Plan 2, your student loan repayment is 9% x (£40,000 - £29,385) = £955 per year. If you make a 5% salary sacrifice pension contribution (£2,000), your effective salary for student loan purposes drops to £38,000, and your repayment becomes 9% x (£38,000 - £29,385) = £775 per year, a saving of £180. You also save income tax and National Insurance on the sacrificed amount. Use the pension contribution calculator to model this.

This strategy is particularly valuable for borrowers who won't repay in full, because every pound diverted from student loan repayments into a pension is a pound saved (the loan would have been written off anyway). However, salary sacrifice does reduce your take-home pay, so it's important to ensure you can afford the contribution.

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:

It's worth noting that repaying your student loan to reduce the monthly deduction, solely to increase your mortgage borrowing, is rarely a good strategy for Plan 2 borrowers. The money used for overpayment might be better put towards a larger deposit, which reduces the loan-to-value ratio and could secure a lower mortgage interest rate.

What Happens If You Move Abroad?

If you leave the UK, your student loan doesn't disappear. You must notify the Student Loans Company and make repayments based on the cost of living in your new country. The SLC sets income thresholds for each country, and you'll need to provide annual evidence of your earnings. Failure to keep the SLC informed can result in penalties and your loan being placed into arrears, with fixed monthly repayments applied regardless of your income.

Interest continues to accrue while you're abroad. If you return to the UK and resume PAYE employment, repayments will be collected automatically through your payslip again.

Multiple Student Loans

It's possible to have more than one student loan, for example an undergraduate Plan 2 loan and a Postgraduate Loan, or a Plan 1 loan from an undergraduate degree and a Plan 4 loan from postgraduate study in Scotland. Each loan is assessed independently against its own threshold, and repayments are deducted simultaneously.

If you have two undergraduate loans on different plans (which is uncommon but possible), the older plan's threshold usually applies. If you have an undergraduate loan and a Postgraduate Loan, both thresholds apply separately and both deductions come from your salary. As shown in the dual-loan worked example above, this can result in combined deductions of several hundred pounds per month.

Checking Your Student Loan Balance

You can check your current balance, view your repayment history, and confirm your plan type through the Student Loans Company online account. You'll receive an annual statement each April showing your balance, interest charged, and repayments received during the previous tax year.

It's good practice to review your statement each year, particularly to check that repayments deducted from your payslip match what the SLC has received. Discrepancies can occur, especially if you've changed employer mid-year or if your employer has applied the wrong plan type.

Calculators

Sources

Mottalib Radif, personal finance expert at Real Salary

Written by Mottalib Radif

MBA INSEAD · Finance Enthusiast

Updated for 2026/27 tax year