How UK Student Loan Repayments Work
Student loan repayments in the UK are collected through your payslip, alongside income tax and National Insurance. Unlike a traditional loan where you make fixed monthly payments, student loan repayments are based on a percentage of your earnings above a threshold — if you earn below the threshold, you pay nothing. This makes student loans function more like a graduate tax than a conventional debt.
Your employer deducts repayments automatically through PAYE once HMRC notifies them via a Student Loan Notice (SL1 or SL2). The deduction appears on your payslip as a separate line item. If you're self-employed, you repay through your Self Assessment tax return instead.
Outstanding balances are written off after a set period (typically 25–40 years depending on your plan), and any remaining balance is cancelled. The loan doesn't affect your credit score or your ability to get a mortgage — lenders can see it on your payslip, but it's treated differently from commercial debt.
Student Loan Plans and Thresholds 2026/27
The plan you're on depends on when and where you started your course. Each plan has its own repayment threshold and rate for the 2026/27 tax year:
| Plan | Who It Applies To | Annual Threshold | Monthly Threshold | Rate |
|---|---|---|---|---|
| Plan 1 | England/Wales before Sep 2012, or Northern Ireland | £26,900 | £2,242 | 9% |
| Plan 2 | England/Wales from Sep 2012 to Jul 2023 | £29,385 | £2,449 | 9% |
| Plan 4 | Scotland | £33,795 | £2,816 | 9% |
| Plan 5 | England/Wales from Aug 2023 onwards | £25,000 | £2,083 | 9% |
| Postgraduate Loan | Master's or Doctoral loan | £21,000 | £1,750 | 6% |
How to Find Your Plan
If you're unsure which plan you're on, check your Student Loan Company (SLC) online account at GOV.UK. Your plan is also shown on your payslip under the student loan deduction line. Common indicators:
- Plan 1: You started university in England or Wales before 1 September 2012, or studied in Northern Ireland at any time.
- Plan 2: You started university in England or Wales between 1 September 2012 and 31 July 2023.
- Plan 4: You studied in Scotland (undergraduate or postgraduate taught).
- Plan 5: You started university in England or Wales from 1 August 2023 onwards.
- Postgraduate Loan: You took a postgraduate Master's or Doctoral loan (separate from your undergraduate loan).
Worked Examples: Student Loan Repayments
Example 1: £30,000 Salary with Plan 2
| Gross salary | £30,000 |
| Plan 2 threshold | £29,385 |
| Income above threshold | £615 |
| Annual repayment (9% × £615) | £55 |
| Monthly repayment | £5 |
Just above the threshold, repayments are minimal. You'd pay less than £5 per month towards your student loan.
Example 2: £40,000 Salary with Plan 1
| Gross salary | £40,000 |
| Plan 1 threshold | £26,900 |
| Income above threshold | £13,100 |
| Annual repayment (9% × £13,100) | £1,179 |
| Monthly repayment | £98 |
Example 3: £50,000 Salary with Plan 2 + Postgraduate Loan
If you have both an undergraduate and postgraduate loan, both are deducted simultaneously:
| Gross salary | £50,000 |
| Plan 2: 9% × (£50,000 − £29,385) | £1,855 |
| Postgrad: 6% × (£50,000 − £21,000) | £1,740 |
| Total annual repayment | £3,595 |
| Monthly repayment | £300 |
With dual loans on a £50,000 salary, you'd lose an extra £300 per month beyond tax and NI. Combined with income tax (£7,486) and NI (£2,994), your total annual deductions would be £14,075 — leaving you with £35,925 take-home (£2,994/month).
Example 4: £35,000 Salary with Plan 5
| Gross salary | £35,000 |
| Plan 5 threshold | £25,000 |
| Income above threshold | £10,000 |
| Annual repayment (9% × £10,000) | £900 |
| Monthly repayment | £75 |
Plan 5 has the lowest threshold of the undergraduate plans (£25,000), so you start repaying at a lower salary. On £35,000, a Plan 5 borrower pays £900/year compared to £504 for Plan 2 and £729 for Plan 1.
Student Loan Repayment Comparison by Plan
Here's how annual repayments compare across all plans at various salary levels:
| Salary | Plan 1 | Plan 2 | Plan 4 | Plan 5 | Postgrad |
|---|---|---|---|---|---|
| £25,000 | £0 | £0 | £0 | £0 | £240 |
| £30,000 | £279 | £55 | £0 | £450 | £540 |
| £35,000 | £729 | £505 | £108 | £900 | £840 |
| £40,000 | £1,179 | £955 | £558 | £1,350 | £1,140 |
| £50,000 | £2,079 | £1,855 | £1,458 | £2,250 | £1,740 |
| £60,000 | £2,979 | £2,755 | £2,358 | £3,150 | £2,340 |
When Are Student Loans Written Off?
Student loans don't last forever. Each plan has a different write-off period:
| Plan | Written Off After |
|---|---|
| Plan 1 | Age 65, or 25 years after first eligible repayment date |
| Plan 2 | 30 years after the April after you left your course |
| Plan 4 | 30 years after the April after you left your course (or age 65 for loans taken before 2007) |
| Plan 5 | 40 years after the April after you left your course |
| Postgraduate Loan | 30 years after the April after you left your course |
Most Plan 2 borrowers won't repay their loan in full — government estimates suggest around 70% of graduates will have some balance written off. This is particularly relevant when deciding whether to make voluntary overpayments: if you're unlikely to repay the full amount anyway, overpaying means you lose money you'd never have had to repay.
Should You Overpay Your Student Loan?
Whether voluntary overpayments make sense depends on your specific situation:
- Overpaying makes sense if: You're a high earner who will repay the full loan before the write-off date. The interest you save by repaying early can be significant, especially on Plan 2 loans where interest can be RPI + 3%.
- Overpaying doesn't make sense if: You're unlikely to repay the full balance before it's written off. Any overpayment simply reduces a balance that would have been cancelled anyway — you're effectively donating money to the Treasury.
- The break-even point: Use the SLC's repayment calculator to estimate your total repayments over the loan term. If your projected total repayments (at your current and expected future salary) are less than your outstanding balance, don't overpay.
Student Loans and Your Credit Score
Student loans do not appear on your credit file and do not affect your credit score. However, lenders can see student loan deductions on your payslip and will factor them into affordability assessments when you apply for a mortgage. A £200/month student loan repayment reduces the mortgage you can borrow by roughly £35,000–£45,000 (depending on the lender's income multiple).
For mortgage purposes, some lenders treat student loan repayments like a committed expenditure (reducing affordability), while others treat them like tax (adjusting the income figure). Ask your mortgage broker which approach your lender takes.
Student Loan Interest Rates
Student loan interest is charged from the day your first payment is made to your university or college:
| Plan | Interest Rate |
|---|---|
| Plan 1 | The lower of RPI or Bank of England base rate + 1% |
| Plan 2 | RPI while studying, then RPI to RPI + 3% based on income |
| Plan 4 | The lower of RPI or Bank of England base rate + 1% |
| Plan 5 | RPI only (capped so you never repay more in real terms than you borrowed) |
| Postgraduate Loan | RPI + 3% while studying, then RPI to RPI + 3% based on income |
Plan 5 loans have the most borrower-friendly interest terms — the balance is adjusted for inflation only, meaning in real terms you never owe more than you borrowed. This is a significant improvement over Plan 2, where high earners can see their balance grow substantially due to RPI + 3% interest.
Common Student Loan Questions
What happens if I change jobs?
Your new employer will start deducting student loan repayments once HMRC issues a Student Loan Notice. There can be a gap of a few weeks during job transitions. If you overpay or underpay during the year, it's reconciled after the tax year ends.
What if I work abroad?
If you move abroad, you must inform the SLC. You'll make repayments directly to SLC based on fixed thresholds for your country of residence, rather than through PAYE. Failure to report overseas income can result in penalties.
Can I have multiple student loans?
Yes. It's common to have both an undergraduate loan (Plan 1, 2, 4, or 5) and a Postgraduate Loan. Both are deducted simultaneously from your salary. You can also have Plan 1 and Plan 4 loans if you studied in both England/Wales and Scotland. Use the calculator above to model multiple loans together.
Sources and Official References
All student loan thresholds and rates are sourced from official UK government publications:
- Student loan repayment: what you pay — GOV.UK
- 2026/27 student loan deduction tables — GOV.UK
- When your student loan gets written off — GOV.UK
- Manage your student loan balance — GOV.UK
- Student finance — GOV.UK
For a complete overview of all tax and deduction changes this year, see our UK Tax Year 2026/27 guide.