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Student loan repayments can be confusing with different plans and thresholds. Here’s how to calculate what you pay and understand your specific loan.
The student loan system in the UK doesn’t work like a conventional debt. There are no monthly bills, no credit impact, and no bailiffs if you don’t pay — repayments are deducted automatically through PAYE, exactly like tax. You only ever repay 9% of what you earn above the threshold for your plan, meaning a pay cut or period of low earnings automatically reduces repayments to zero.
The single most important thing to establish is which plan you’re on — this determines your threshold, interest rate, and write-off date. A Plan 4 graduate in Scotland starts repaying four years later than a Plan 1 graduate in England, even on the same salary. And a Plan 5 graduate who started university from 2023 faces a 40-year write-off compared to 30 years for Plan 2.
Student Loan Plans Compared
2026/27 Overview
Plan
Who
Threshold
Rate
Write-off
Plan 1
England/Wales (pre-2012), NI
£26,900
4.1%*
25 years after first due
Plan 2
England/Wales (2012-2023)
£29,385
RPI + up to 3%, capped at 6%**
30 years after graduation
Plan 4
Scotland
£33,795
4.1%*
30 years after graduation
Plan 5
England (from Aug 2023)
£25,000
RPI only (4.1%)
40 years after graduation
Postgrad Loan
Masters/PhD (2016+)
£21,000
RPI + 3%, capped at 6%
30 years
*Linked to Bank of England rate
**Varies with income
While studying: RPI + 3%, capped at 6% for 2026/27
Plan 5 Interest
Based On
Rate
RPI only
4.1% (2026/27)
Plan 5 interest is capped at RPI — lower than Plan 2.
Will I Ever Pay Off My Loan?
For most Plan 2 graduates, the honest answer is no — and that’s not a bad thing. The Institute for Fiscal Studies estimates that around 80% of Plan 2 borrowers will have some balance written off after 30 years. This means for most graduates, the student loan effectively works as a graduate income tax: you pay 9% above the threshold for your working life, then it disappears. Whether you borrowed £40,000 or £60,000 can be almost irrelevant — what matters is your earnings, not your balance.
This changes the calculus on early repayments entirely. If you’re unlikely to repay in full anyway, making overpayments is simply donating money to the Student Loans Company.
Reality Check by Plan
Plan
Typical Graduate
Will They Pay Off?
Plan 1
£20k debt
Often yes (lower debt)
Plan 2
£50-60k debt
Most won’t fully
Plan 4
£15-30k debt
Often yes (Scotland fees lower)
Plan 5
£40-50k debt
Many won’t (40 year write-off)
Who Actually Pays Off Plan 2?
Career Type
Starting Salary
Lifetime Earnings
Pays Off?
High-earning professional
£50k+
£3m+
Likely yes
Average graduate
£30k
£1.5m
Probably not
Public sector
£25-35k
£1.2m
No
Institute for Fiscal Studies estimates ~80% of Plan 2 borrowers never fully repay.
When Is Write-Off?
Write-Off Rules
Plan
Written Off
Plan 1 (pre-2006)
Age 65 or 25 years after first repayment
Plan 1 (2006-2012)
25 years after first repayment due
Plan 2
30 years after first repayment due
Plan 4
30 years after first repayment due
Plan 5
40 years after first repayment due
Postgrad Loan
30 years after first repayment due
What “Written Off” Means
Effect
Detail
Balance disappears
No further payments required
No tax implication
Unlike some debts
Doesn’t affect credit
Student loans don’t appear on credit report
Should I Repay Early?
General Rule: Don’t Repay Early
Reason
Explanation
Loan may be written off
Why pay more than necessary?
Low effective interest
Only pay while earning above threshold
Better uses for money
Pension, ISA, mortgage
No credit impact
Student loans don’t affect credit score
When Early Repayment Makes Sense
Situation
Why Repay
Very high earner (£100k+)
Will pay off anyway, stop interest
Small balance remaining
Clean slate
Emigrating permanently
May have to repay anyway
Mortgage maximisation
Some lenders count SL as debt
Early Repayment Calculator
Should you pay off a £30,000 Plan 2 loan?
Scenario
Lifetime Repaid
Outcome
Average salary (£40k)
~£35,000
Overpaid by £5k
High salary (£80k)
~£50,000+
Should pay off early
Low salary (£30k)
~£15,000
Would have wasted £15k
Multiple Loans
If You Have Multiple Plans
Combination
How Repayments Work
Plan 1 + Plan 2
9% on each threshold (18% above both!)
Plan 2 + Postgrad
9% Plan 2 + 6% Postgrad (15% total)
Any + Postgrad
Postgrad adds 6% above its threshold
Example: Plan 2 + Postgrad Loan
Salary: £50,000
Plan 2
Postgrad
Total
Threshold
£29,385
£21,000
Above threshold
£20,615
£29,000
Rate
9%
6%
Annual repayment
£1,855
£1,740
£3,595
Postgrad loans add £1,740/year on a £50k salary.
Impact on Take-Home Pay
£40,000 Salary Example
Plan
Gross
Tax
NI
SL
Take-Home
No loan
£40,000
£5,486
£2,194
£0
£32,320
Plan 1
£40,000
£5,486
£2,194
£1,179
£31,141
Plan 2
£40,000
£5,486
£2,194
£955
£31,365
Plan 4
£40,000
£5,486
£2,194
£558
£31,762
Plan 5
£40,000
£5,486
£2,194
£1,350
£30,970
Self-Employed Repayments
How It Works
Feature
Detail
When calculated
Self Assessment tax return
Based on
Profit above threshold
When paid
With tax bill (January 31)
Payments on account
May apply
Example: Self-Employed, Plan 2
Profit
Above £29,385
Repayment
£30,000
£615
£55
£50,000
£20,615
£1,855
Student Loan and Mortgages
How Lenders View It
Lender Approach
Impact
Count as committed expenditure
Reduces borrowing amount
Ignore it
No impact
Varies by lender
Check specific policy
Reducing Impact
Strategy
Effect
Choose lender that ignores SL
Maximum borrowing
Pay off loan (if makes sense)
Removes monthly payment
Show net salary
Some forms allow
Key Takeaways
Check your plan — different thresholds and rules
Repay 9% above threshold — not of total salary
Most don’t pay off Plan 2 — especially mid-earners