Student Loan Repayment Explained: UK Plans 1, 2, 4 and 5
Student loan repayments are collected through PAYE alongside income tax and National Insurance, but the rules differ significantly depending on which plan you're on. Here's how each one works.
How student loan repayment works
Student loans in the UK are not like commercial loans. You only repay when your income exceeds a threshold specific to your plan. Repayments are calculated as a percentage of your income above that threshold — not of the total loan balance. If your income falls below the threshold, repayments stop automatically.
For employees, repayments are deducted through PAYE by your employer in the same way as income tax and National Insurance. For the self-employed, repayments are calculated and paid as part of your Self Assessment tax return.
The repayment rate is 9% of income above the threshold for Plans 1, 2, 4 and 5. The Postgraduate Loan uses a separate 6% rate.
Plans at a glance: 2026/27 thresholds
| Plan | Who is on it? | Repayment threshold | Written off after |
|---|---|---|---|
| Plan 1 | Started before Sept 2012 (England/Wales); any time in Northern Ireland | £26,065/year (£2,172/month) | Age 65, or 25 years after first repayment |
| Plan 2 | Started on or after Sept 2012 (England/Wales) | £28,470/year (£2,372/month) | 30 years after entering repayment |
| Plan 4 | Scotland (started from 1998 onwards, studied in Scotland) | £32,745/year (£2,729/month) | Age 65, or 30 years after first repayment |
| Plan 5 | Started on or after Aug 2023 (England) | £25,000/year (£2,083/month) | 40 years after entering repayment |
| Postgraduate | Postgraduate Master's or Doctoral loan (England/Wales) | £21,000/year (£1,750/month) | 30 years after entering repayment |
What makes each plan different
Plan 1
The oldest plan, used by graduates who started before September 2012 in England and Wales, or who studied in Northern Ireland at any time. Interest is capped at the lower of the Retail Price Index (RPI) or the Bank of England base rate plus 1%. Plan 1 thresholds rise each April in line with the RPI or earnings growth (whichever is lower). The write-off age of 65 means many Plan 1 borrowers who took low-income careers will never fully repay.
Plan 2
The most common plan for English and Welsh graduates who started university from September 2012. Interest rates are higher than Plan 1: during study and until April after graduation, interest is RPI + 3%. After that it slides between RPI and RPI + 3% depending on income (£28,470 threshold to £49,130). The 30-year write-off means most middle-income graduates will have balances written off rather than fully repaid.
Plan 4
Available to Scottish students who received loans from the Student Awards Agency Scotland (SAAS). Plan 4 has the highest repayment threshold of all the current plans (£32,745 in 2026/27) and charges interest at RPI only (no additional percentage). Scottish graduates earning below £32,745 make no repayments at all.
Plan 5
Introduced for students starting from August 2023 in England. Plan 5 has the longest write-off period (40 years) and the lowest repayment threshold (£25,000). Interest is charged at RPI only, which is lower than Plan 2. Because of the long write-off and low threshold, many Plan 5 borrowers will repay more in total than under Plan 2, particularly those in mid-range careers where cumulative repayments exceed the balance before the 40-year term.
Postgraduate Loan
If you took out a postgraduate Master's loan or Doctoral loan, repayments run concurrently with any undergraduate plan repayment but at a different rate: 6% of income above £21,000.
If you have both an undergraduate plan and a postgraduate loan, you could be repaying a combined 15% of income above the respective thresholds (9% undergraduate + 6% postgraduate, on the portion of income where both apply). Use the student loan calculator to see how both deductions interact with your take-home pay.
Should you overpay your student loan?
For most borrowers, voluntary overpayments are rarely worth making. The key reason: if your loan is likely to be written off before you fully repay it (which is the case for the majority of Plan 2 and Plan 5 borrowers), overpaying just means you pay more than you would otherwise have been required to.
| Profile | Likely outcome | Overpay? |
|---|---|---|
| Low to mid earner on Plan 2 (typical graduate) | Loan written off after 30 years | No, overpaying costs you more |
| High earner expecting to fully repay Plan 1 | Balance cleared before write-off | Possibly, reduces total interest |
| High earner on Plan 2 with small balance | Likely to fully repay regardless | Possibly. Check the numbers |
| New Plan 5 borrower (40-year term) | Uncertain, depends on career trajectory | Seek guidance before overpaying |
Voluntary repayments are not refundable
If you make voluntary overpayments and your loan is later written off, you will not get a refund. The money is gone. Run the numbers carefully with the student loan calculator before making any voluntary repayments.