Student loans aren't like normal debt
Most debt works the same way: you borrow money, you're charged interest, and you repay until the balance is gone. If you don't keep up repayments, you face consequences.
UK student loans are different in almost every respect. Repayments are income-contingent — you pay 9% of earnings above a threshold, automatically deducted from your payslip. If your income drops, your repayments drop. If you lose your job, you pay nothing. After a set number of years (25–40 depending on your plan), any remaining balance is written off entirely with no credit impact.
This matters because it changes the entire framework for how you should think about the loan. It is not a debt in the conventional sense — it's closer to a graduate-specific income tax.
Model your exact repayment timeline — and find out if you'll clear it or have it written off.
Student Loan Repayment Calculator →Which plan are you on?
| Plan | Who it applies to | 2025–26 repayment threshold | Rate | Write-off |
|---|---|---|---|---|
| Plan 1 | England/Wales starters before Sept 2012; Northern Ireland | £24,990/yr | 9% | 25 years |
| Plan 2 | England/Wales starters Sept 2012–July 2023 | £27,295/yr | 9% | 30 years |
| Plan 4 | Scottish students (SAAS loans) | £31,395/yr | 9% | 30 years |
| Plan 5 | New English students from Aug 2023 | £25,000/yr | 9% | 40 years |
| Postgrad Loan | Masters/Doctoral loan borrowers | £21,000/yr | 6% | 30 years |
If you have both an undergraduate and a Postgraduate Loan, you repay both simultaneously — 9% on the undergraduate loan (above the UG threshold) and 6% on the postgraduate loan (above £21,000). The deductions are calculated separately and added together on your payslip.
How repayments are calculated
You repay 9% of everything you earn above the repayment threshold. For Plan 2 in 2025–26, the threshold is £27,295 per year (£2,274.58 per month, £524.90 per week).
Example: you earn £35,000. That's £7,705 above the Plan 2 threshold. Your annual repayment is 9% × £7,705 = £693.45, or about £57.79 per month.
At £50,000: £22,705 above the threshold → £2,043.45/year → £170.29/month.
Repayments stop the moment your income drops below the threshold — there are no penalties, no missed payment markers, and no effect on your credit file. The loan balance simply continues to accrue interest in the background.
Interest rates
This is where the different plans diverge significantly:
- Plan 1 and Plan 4: Interest is capped at whichever is lower — the Retail Price Index (RPI), or the Bank of England base rate plus 1%. This means Plan 1 and 4 interest is relatively modest and tracks inflation closely.
- Plan 2: Interest is RPI plus up to 3%. The 3% add-on applies in full while you're studying and for earners above £49,130. Between £27,295 and £49,130 the add-on tapers from 0% to 3%. When RPI is high, Plan 2 balances can grow substantially even while you're repaying.
- Plan 5: Interest is capped at RPI only — no add-on. This is more favourable than Plan 2 on interest.
- Postgraduate Loan: RPI plus 3%, regardless of income.
Interest rates change each September and are published by the Student Loans Company. Check the SLC website or HMRC for the current rate.
The write-off: the most important fact for Plan 2 borrowers
Plan 2 loans are written off 30 years after the April following graduation. For someone who graduated in summer 2016, the write-off date is April 2047.
Research by the Institute for Fiscal Studies (IFS) found that only around 25% of Plan 2 borrowers will fully repay their loan within the 30-year window. The other 75% will have some or all of their balance written off. For many borrowers — particularly those with larger balances, lower-earning careers, or career breaks — the loan effectively functions as an additional tax for 30 years, then disappears.
This has a profound implication: for those who are unlikely to repay in full, the loan balance itself is largely irrelevant. Whether you owe £40,000 or £60,000 may not matter at all to your total lifetime repayments. What matters is your income over the repayment period, because that determines how much you actually pay.
Should you make voluntary overpayments?
This is the most common question — and the answer depends almost entirely on whether you expect to clear the loan within the write-off window.
If you are unlikely to repay in full before write-off (most Plan 2 borrowers), voluntary overpayments make no financial sense. You'd be handing over extra cash to reduce a balance that would have been written off anyway. The money is better deployed elsewhere — into an ISA, a pension, or paying down higher-interest debt.
If you are likely to repay in full — high earner, small initial balance, or you're on Plan 1 with a 25-year window — overpaying can save you interest. Run the numbers using our calculator: if your projected clearance year is well within the write-off window, there's a clear case for accelerating repayments.
Plan 5 borrowers face a 40-year write-off window, which makes it more likely that higher earners will benefit from overpayments. The lower interest rate (RPI only) also means the balance grows more slowly, potentially making full repayment realistic for more people.
If you're self-employed
Student loan repayments for the self-employed are collected via Self Assessment, not payroll. HMRC calculates what you owe based on your taxable profits above the repayment threshold and adds it to your tax bill. You pay it by the 31 January Self Assessment deadline. Payments on account don't apply to student loan repayments.
If you go abroad
Moving abroad doesn't cancel or pause your student loan. You must inform the Student Loans Company and begin making overseas repayments based on a country-specific income threshold (which varies by country's cost of living). Failing to make repayments can result in a fixed monthly charge being applied instead. The debt follows you.