Plan 5 Student Loans Explained: What Changed for Students Starting from 2023
If you started an undergraduate course in England on or after 1 August 2023, your student loan falls under a brand-new repayment plan: Plan 5. This represents the biggest overhaul to the student finance system in over a decade, and it affects everything from how much you repay each month to how long you will be making those repayments.
In this article we break down exactly what Plan 5 means for you, how the numbers compare to the old Plan 2 system, and what the practical impact is on your finances after graduation.
What Is Plan 5?
Plan 5 was introduced by the UK Government following the recommendations in the Augar Review of post-18 education. The aim was to rebalance the cost of higher education between graduates and the taxpayer. Under the previous Plan 2 system, the government estimated that around 70 to 80 percent of graduates would never repay their loan in full before the 30-year write-off. Plan 5 changes that calculation significantly.
Plan 5 applies specifically to students who are domiciled in England and who started an undergraduate course on or after 1 August 2023. If you started before that date, you remain on Plan 2 (or whichever plan you were originally assigned to). Scottish students continue on Plan 4, and Northern Irish students remain on Plan 1.
Key Features of Plan 5
Repayment Threshold
The Plan 5 repayment threshold is set at £25,000 per year. This is notably lower than the Plan 2 threshold of £27,295. The threshold is expected to rise in line with RPI inflation each April, but the starting point is lower than what Plan 2 graduates currently enjoy. This means you start repaying sooner once you enter the workforce.
Repayment Rate
Like all other UK student loan plans, Plan 5 charges a repayment rate of 9 percent of earnings above the threshold. If you earn £30,000 per year, you would repay 9% of £5,000, which is £450 per year or £37.50 per month.
Interest Rate
This is where Plan 5 differs most dramatically from Plan 2. Under Plan 2, interest was charged at RPI plus up to 3 percent, depending on your income. That meant graduates could face interest rates of 7 percent or more during periods of high inflation.
Under Plan 5, the interest rate is capped at RPI only, with no additional percentage added. In real terms, this means your loan balance grows broadly in line with inflation rather than significantly outpacing it. For many graduates, this change alone makes the loan feel more manageable, even if they end up paying for longer.
Repayment Period
Plan 5 loans are written off after 40 years, compared to 30 years for Plan 2. This is the trade-off for the lower interest rate and lower tuition fee cap. You will be making repayments for a longer period, which means more graduates will repay their loan in full or close to it.
Tuition Fee Cap
The maximum tuition fee for Plan 5 students was initially frozen at £9,250 per year, the same level it had been since 2017. However, from the 2025-26 academic year the cap was increased to £9,535. While this is a modest increase, it signals that fees may continue to rise incrementally under Plan 5.
Plan 5 vs Plan 2: A Side-by-Side Comparison
| Feature | Plan 2 | Plan 5 |
|---|---|---|
| Repayment threshold | £27,295 | £25,000 |
| Repayment rate | 9% | 9% |
| Interest rate | RPI + up to 3% | RPI only |
| Write-off period | 30 years | 40 years |
| Max tuition fee | £9,250 | £9,535 (from 2025-26) |
Who Benefits from Plan 5?
The impact of Plan 5 varies considerably depending on your earnings trajectory after graduation.
Lower earners may actually pay less in total under Plan 5 than they would have under Plan 2. The lower interest rate means their balance does not spiral as quickly, and if they never earn substantially above the threshold, their monthly repayments are modest. However, they will be repaying for an extra decade.
Middle earners are the group most likely to see the biggest change. Under Plan 2, many in this bracket would have had their remaining balance written off after 30 years. Under Plan 5, the combination of a lower threshold, lower interest, and longer repayment window means they are more likely to repay the full amount.
Higher earners will repay their loan faster regardless of the plan, but Plan 5 means they start repaying slightly sooner due to the lower threshold. The lower interest rate benefits them too, as it reduces the total amount repaid.
Practical Tips for Plan 5 Borrowers
- Use the calculator: Our student loan calculator lets you see exactly what your monthly repayments will be under Plan 5 based on your actual or expected salary.
- Think carefully about voluntary repayments: With a lower interest rate, there is less urgency to overpay. Your money may work harder in a savings account or pension.
- Keep your contact details updated: The Student Loans Company needs your current address and employment details, especially if you move abroad.
- Check your payslip: Once you start working, verify that the correct plan type and repayment amount appear on your payslip. Errors do happen.
- Plan for the long term: A 40-year repayment window means your student loan will be part of your financial life well into your fifties or sixties. Factor it into your long-term financial planning.
Frequently Asked Questions About Plan 5
Can I switch from Plan 2 to Plan 5? No. Your plan is determined by when you started your course. If you began before August 2023, you stay on Plan 2.
What if I do a postgraduate course? Postgraduate loans remain separate. If you have both a Plan 5 undergraduate loan and a postgraduate loan, repayments for each are calculated independently.
Does Plan 5 affect Scottish or Northern Irish students? No. Plan 5 is exclusively for students domiciled in England. Scottish students use Plan 4 and Northern Irish students use Plan 1.
What happens if I move abroad? You still need to repay. The Student Loans Company sets fixed repayment amounts based on the cost of living in your country of residence.