Plan 5 Student Loans Explained: What Changed for Students Starting from 2023
Started uni in England from August 2023 onwards? Congratulations, you're on Plan 5. It's the biggest shake-up to student finance in over a decade, and the government basically changed the deal without most students fully understanding what they signed up for. Your repayment threshold is lower. Your repayment period is longer. The interest rate is kinder. Make of that what you will.
Let's break down what Plan 5 actually means for your wallet, how it compares to Plan 2 (which your slightly older mates are on), and what it all means once you're out in the real world trying to pay rent and save for a house deposit at the same time.
What Is Plan 5?
Plan 5 came out of the Augar Review, which basically told the government that too many graduates were never paying their loans back. Under Plan 2, an estimated 70-80% of graduates would see their balance written off after 30 years, with the taxpayer picking up the tab. The government decided that wasn't sustainable. So they changed the rules. Whether that's fair or not depends on who you ask.
This only applies to English-domiciled students who started undergrad courses from 1 August 2023 onwards. Started before that? You're still on Plan 2 (or whichever plan you were originally on). Scottish students are on Plan 4. Northern Irish students are on Plan 1. None of this affects them.
Key Features of Plan 5
Repayment Threshold
You start repaying once you earn over £25,000 a year. That's notably lower than Plan 2's threshold of £27,295. It should rise with RPI inflation each April, but the starting point means you'll be making repayments sooner than your Plan 2 friends on the same salary. Not massively -- but it adds up.
Repayment Rate
Same as every other plan: 9% of everything you earn above the threshold. Earn £30,000? You repay 9% of £5,000 = £450 a year, or £37.50 a month. Not devastating, but it's money you'll notice.
Interest Rate
This is the one genuinely good thing about Plan 5. Under Plan 2, interest could be RPI plus up to 3%. When inflation spiked, some graduates were being charged 7%+ on their loans. Absolutely brutal. Your balance could grow faster than you were paying it off, which felt like running on a treadmill that kept speeding up.
Plan 5 caps interest at RPI only. No extra percentage bolted on. Your balance grows roughly in line with inflation rather than racing ahead of it. That's a meaningful improvement, even if the longer repayment period means you're dealing with it for more of your life.
Repayment Period
Here's the sting. Plan 5 loans are written off after 40 years. Forty. That's a decade longer than Plan 2's 30-year write-off. Start repaying at 22 and you could be making payments until you're 62. Let that sink in. The lower interest rate and lower fees are the trade-off. More graduates will end up repaying in full -- which is exactly what the government wanted.
Tuition Fee Cap
Fees were frozen at £9,250 since 2017, which sounds like good news until you remember inflation has made that freeze feel pretty pointless for universities. From 2025-26, the cap crept up to £9,535. A modest increase, sure. But it signals that fees are going to keep nudging upward under Plan 5. Fun.
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?
It depends entirely on how much you end up earning. Which is a brilliant thing to have to predict at age 18.
Lower earners might actually pay less in total than they would've on Plan 2. The interest isn't piling up as fast, and if you never earn much above the threshold, your monthly repayments stay small. The catch: you're making those small payments for an extra ten years.
Middle earners get the roughest deal. Under Plan 2, loads of people in this bracket would've had their remaining balance written off at the 30-year mark. Under Plan 5, the combination of lower threshold, lower interest, and that 40-year window means you're far more likely to repay the lot. The write-off was your safety net. It just got moved ten years further away.
Higher earners clear the loan quickly regardless of the plan. Plan 5 means you start repaying slightly sooner (lower threshold) but pay less interest overall. If you're going into finance, law, or tech -- you're probably fine either way.
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? Nope. Your plan is locked in by when you started your course. Pre-August 2023 = Plan 2. No swapping.
What if I do a postgraduate course? Postgrad loans are separate. If you end up with both a Plan 5 undergrad loan and a postgrad loan, repayments are calculated independently. Yes, that means two lots of 9% if you earn enough. Painful.
Does Plan 5 affect Scottish or Northern Irish students? No. Plan 5 is England only. Scotland = Plan 4. Northern Ireland = Plan 1. They've got their own systems (and their own complaints about them).
What happens if I move abroad? You still owe it. The SLC sets fixed repayment amounts based on the cost of living wherever you end up. Moving to Australia doesn't make the debt disappear -- sorry.