Student Loan Repayment Plans 1, 2, 4 and 5 Compared (2026/27)
Direct Answer: UK student loans run on five separate repayment plans - 1, 2, 4, 5 and the Postgraduate Loan - each with its own income threshold, interest rate and write-off date. You repay 9% of income above your plan's threshold (6% for the Postgraduate Loan), deducted automatically like tax, until the balance is cleared or the loan is written off after 25-40 years.
Which plan you're on depends entirely on where you studied and when your course started - not on how much you borrowed or how much you now earn. Two graduates with identical salaries can have very different monthly deductions, interest rates and write-off dates simply because one started university two years before the other.
This guide compares all five plans side by side using confirmed 2026/27 figures, explains how combined repayments work if you also took out a Postgraduate Loan, and covers the question most guides skip: whether you're actually likely to repay the loan in full.
The Five UK Student Loan Plans at a Glance
Every UK student loan borrower repays under one (or more) of five plan types administered by the Student Loans Company (SLC) and collected via HMRC. Here are the confirmed 2026/27 thresholds and rates:
| Plan | Annual Threshold | Monthly Threshold | Repayment Rate | Interest Rate | Written Off After |
|---|---|---|---|---|---|
| Plan 1 | £26,900 | £2,241 | 9% | 4.1% | 25 years |
| Plan 2 | £29,385 | £2,448 | 9% | Variable, up to ~6% | 30 years |
| Plan 4 (Scotland) | £33,795 | £2,816 | 9% | 4.1% | 30 years |
| Plan 5 | £25,000 | £2,083 | 9% | 4.1% | 40 years |
| Postgraduate Loan | £21,000 | £1,750 | 6% | 6.0% | 30 years |
Which Plan Am I On?
Your plan is fixed by where you studied and when your course started, not by your current income or where you now live:
- Plan 1 - most English and Welsh undergraduates who started before September 2012, and most Northern Ireland undergraduates regardless of start date.
- Plan 2 - English and Welsh undergraduates who started their course between September 2012 and July 2023.
- Plan 4 - Scottish undergraduates, administered by the Student Awards Agency for Scotland (SAAS).
- Plan 5 - English undergraduates starting their course from August 2023 onwards, which replaced Plan 2 for new starters.
- Postgraduate Loan - anyone who took out a Master's or Doctoral loan, repaid alongside any undergraduate plan they also hold.
You can hold more than one plan at once - most commonly Plan 2 or Plan 5 alongside a Postgraduate Loan - and each is repaid independently using its own threshold.
How Repayments Are Actually Calculated
Student loan repayments are not a fixed monthly instalment like a personal loan or mortgage. Instead, you repay 9% of your income above the threshold (6% for the Postgraduate Loan), recalculated every pay period. If your income falls below the threshold in a given month, no repayment is deducted that month, even if your annual salary is above the yearly threshold.
For example, on Plan 2 with a monthly threshold of £2,448: earning £3,000 in a given month means you repay 9% of the £552 above the threshold, which is £49.68 for that pay period - not 9% of your full monthly salary.
Combined Repayments: Undergraduate Loan Plus Postgraduate Loan
If you hold both an undergraduate plan and a Postgraduate Loan, both are repaid simultaneously and independently - HMRC doesn't merge them into a single threshold. You pay 9% of income above your undergraduate threshold, plus 6% of income above the £21,000 Postgraduate Loan threshold.
For a Plan 2 borrower earning £40,000 who also has a Postgraduate Loan: 9% applies to income above £29,385, and a separate 6% applies to income above £21,000. On the portion of salary above both thresholds, that's 15% combined coming off your payslip toward student loans alone, on top of Income Tax and National Insurance.
Plan 2 vs Plan 5: The Key Differences
Plan 5 replaced Plan 2 for new English undergraduates starting from August 2023, and the two plans differ in ways that cut in opposite directions:
- Threshold: Plan 5's £25,000 threshold is significantly lower than Plan 2's £29,385, so Plan 5 borrowers start repaying sooner and on lower salaries.
- Interest: Plan 5 charges a flat 4.1%, while Plan 2 uses a Variable Interest Rate linked to RPI that can run higher for high earners, though it's capped against market rates.
- Write-off: Plan 5 runs for 40 years before write-off, a full decade longer than Plan 2's 30 years, meaning Plan 5 borrowers who don't clear the balance make repayments for far longer.
Because Plan 5 combines a lower threshold with a longer repayment window, most Plan 5 graduates will make far more total repayments over their working life than Plan 2 graduates on an equivalent salary, even though Plan 5's headline interest rate is often lower.
Will You Actually Repay the Full Loan?
This is the question most student loan guides skip. Because repayments are calculated as a fixed 9% of income above the threshold rather than as an instalment sized to clear the balance, many Plan 2 and Plan 5 borrowers never repay their loan in full before it's written off.
For low and middle earners, interest accrues on the balance faster than 9% of their income above the threshold can repay it, so the outstanding balance can actually grow for years even while repayments are being deducted every month. Only graduates who go on to earn well above the threshold for a sustained period are likely to clear the balance before the 30 or 40-year write-off date. For most borrowers in this position, the system functions closer to a graduate tax tied to income than a conventional loan tied to the amount borrowed.
Should You Make Voluntary Overpayments?
There's no penalty for overpaying, and you can make voluntary lump-sum payments directly to the Student Loans Company at any time. Whether it's worthwhile depends on your specific position:
- Likely to repay in full anyway (high earner, later in the term): overpaying can genuinely reduce total interest paid, similar to a mortgage overpayment.
- Unlikely to repay in full before write-off (typical Plan 2/5 earner): overpaying risks paying money toward a balance that would have been written off regardless, with no benefit.
- Close to the write-off date with a small remaining balance: clearing it can be worthwhile to stop the (usually small) ongoing deduction.
Because this depends heavily on individual projected earnings, it's worth modelling your own numbers rather than following blanket advice either way.
How Repayments Are Collected
If you're employed, repayments are deducted automatically through PAYE alongside Income Tax and National Insurance, based on each pay period's earnings, and passed to HMRC without any action needed from you. If you're self-employed, repayments are instead calculated on your annual profits through Self Assessment and paid as part of your tax bill.
One common mistake: moving between employment and self-employment, or having multiple jobs, can cause your annual repayment (based on total yearly income) to differ from what was deducted through PAYE, requiring a reconciliation via Self Assessment.
Frequently Asked Questions
What are the 2026/27 repayment thresholds for each student loan plan?
For 2026/27: Plan 1 is £26,900 a year, Plan 2 is £29,385, Plan 4 (Scotland) is £33,795, Plan 5 is £25,000, and the Postgraduate Loan threshold is £21,000. You repay 9% of income above the relevant threshold (6% for the Postgraduate Loan).
How do I know which student loan plan I'm on?
It depends on where you studied and when your course started: Plan 1 covers most English and Welsh students who started before September 2012 and most Northern Ireland students; Plan 2 covers English and Welsh students starting between September 2012 and July 2023; Plan 4 covers Scottish students; and Plan 5 covers new English undergraduates starting from August 2023 onwards. Your Student Loans Company account confirms your exact plan.
What is the difference between Plan 2 and Plan 5?
Plan 5 replaced Plan 2 for new English undergraduates from August 2023. Plan 5 has a lower repayment threshold (£25,000 vs £29,385 in 2026/27), so repayments start sooner and on smaller earnings, but it also has a much longer write-off period of 40 years compared with 30 years on Plan 2, and a lower fixed interest rate of 4.1% instead of Plan 2's income-linked variable rate.
How much interest do I pay on my student loan?
Plan 1, Plan 4 and Plan 5 currently charge a fixed 4.1% interest rate. Plan 2 uses a Variable Interest Rate linked to RPI, capped so it never exceeds the highest comparable market rate, currently around 6% at the top income tier. The Postgraduate Loan charges 6% regardless of income.
When is my student loan written off?
Plan 1 loans are written off 25 years after the April you first became due to repay. Plan 2, Plan 4 and Postgraduate Loans are written off after 30 years. Plan 5 loans are written off after 40 years. Any remaining balance at that point is cancelled and doesn't appear on your credit file.
Will I actually repay my student loan in full before it's written off?
For many graduates on Plan 2 or Plan 5, no. Because repayments are a fixed 9% of income above the threshold rather than based on the loan balance, low and middle earners often have interest added faster than they repay it, meaning the loan is written off with a substantial balance still outstanding - functioning closer to a graduate tax than a conventional loan for most borrowers.
What happens if I have both a Postgraduate Loan and an undergraduate loan?
You repay both simultaneously and independently. You pay 9% of income above your undergraduate plan's threshold (Plan 1, 2, 4 or 5) plus 6% of income above the £21,000 Postgraduate Loan threshold, so someone earning well above both thresholds can have 15% of that portion of income deducted.
Is it worth making voluntary overpayments on my student loan?
It depends on your plan, income and how long is left until write-off. There's no early repayment penalty, but if you're on Plan 2 or Plan 5 and unlikely to clear the balance before it's written off anyway, voluntary overpayments can mean paying money you'd never otherwise have had to pay. High earners close to clearing the balance, or Plan 1/4 borrowers nearer the end of their term, benefit more clearly.
How are student loan repayments deducted if I'm employed?
Repayments are deducted automatically through PAYE alongside Income Tax and National Insurance, calculated on each pay period's earnings above a pro-rated threshold, and paid directly to HMRC, which passes the money to the Student Loans Company.
Do self-employed people repay student loans differently?
Yes. Self-employed borrowers report their income through Self Assessment, and student loan repayments are calculated on annual profits above the threshold and paid as part of the Self Assessment tax bill, rather than being deducted throughout the year via PAYE.
Does my student loan affect my ability to get a mortgage?
Yes, indirectly. Mortgage lenders treat ongoing student loan repayments as a regular monthly outgoing when assessing affordability, which can reduce the amount they're willing to lend, even though the loan itself doesn't appear on your credit file in the way commercial debt does.
A Quick Note on Student Loan Planning
Repayment thresholds are reviewed and can change each April - the figures in this guide reflect confirmed 2026/27 rates published by the Student Loans Company and GOV.UK at the time of writing. Always check your exact plan and current thresholds via your Student Loans Company online account before making overpayment decisions. See our full disclaimer.