Understanding Student Loan Repayments
Student loan repayments in the UK are income-contingent, meaning you only repay when you earn above a certain threshold. The amount you repay depends on which plan you are on, not the total amount you borrowed. Repayments are automatically deducted from your salary through the PAYE system, similar to income tax and National Insurance. If your income drops below the threshold, your repayments stop automatically. This makes UK student loans one of the most borrower-friendly systems in the world.
The Five Student Loan Plans
Plan 1 applies to students who started university in England and Wales before September 2012, or in Northern Ireland at any time. Repayments begin at £24,990 per year at a rate of 9%. Plan 2 is the most common plan for English and Welsh students who started from September 2012 onwards, with a higher threshold of £27,660. Plan 4 is specifically for Scottish students, with the highest threshold of £31,395. Plan 5 was introduced for students starting courses from August 2023, with a threshold of £25,000. Postgraduate loans have a separate threshold of £21,000 and a lower repayment rate of 6%. If you have both an undergraduate and postgraduate loan, you repay both simultaneously.
How Repayments Are Calculated
Your repayment amount is calculated as a percentage of your income above the threshold, not on the total amount owed. For example, on Plan 2, if you earn £35,000, your annual repayment is 9% of £7,340 (£35,000 minus £27,660), which equals £660.60 per year or £55.05 per month. This is a relatively modest deduction that reduces your monthly take home pay by around £55. Student loans are written off after a certain period: 25 years for Plan 1, 30 years for Plan 2, 30 years for Plan 4, 40 years for Plan 5, and 30 years for postgraduate loans.
Should You Repay Early?
Whether to make voluntary repayments depends on your individual circumstances. Most Plan 2 borrowers will not repay their loan in full before it is written off, making voluntary repayments economically disadvantageous. However, if you are a high earner or have a Plan 1 loan with a smaller balance, early repayment may save you money on interest. Use our calculator to see the impact of your student loan on your monthly pay and explore our main UK take home pay calculator for a complete picture of all deductions.