Everything you need to know about repaying your student loan
The UK student loan system is designed to make higher education accessible by allowing students to borrow money for tuition fees and living costs, with repayment only beginning once you earn above a certain threshold after graduating. Unlike conventional loans, student loan repayments are linked directly to your income rather than the amount you owe, making them more manageable for graduates at all salary levels.
The Student Loans Company (SLC) administers the loans on behalf of the UK government. Your repayments are collected automatically through PAYE if you are employed, or through your Self Assessment tax return if you are self-employed. You never have to make manual payments unless you choose to make voluntary overpayments.
There are several different loan plan types, each with its own repayment threshold, interest rate, and write-off period. Which plan you are on depends on when and where you started your course. Understanding your plan type is the first step to knowing how much you will repay.
Plan 1 applies to students who lived in England or Wales and started their undergraduate course before 1 September 2012. It also covers all students from Northern Ireland, regardless of when they started. Plan 1 loans generally carry lower balances than Plan 2 loans because tuition fees were capped at lower levels during this period.
Plan 2 applies to students who lived in England or Wales and started their undergraduate course on or after 1 September 2012. This is the most common plan type for recent graduates. Plan 2 loans tend to have higher balances because tuition fees increased to up to £9,250 per year from 2012 onwards. Advanced Learner Loans are also on Plan 2.
Plan 4 covers students who lived in Scotland and received funding from the Student Awards Agency for Scotland (SAAS). Plan 4 replaced the old Plan 1 arrangements for Scottish borrowers from April 2021. Tuition fees in Scotland are generally lower for Scottish students (and often fully covered by SAAS grants), so Plan 4 balances tend to be smaller than Plan 2 balances.
Plan 5 is the newest plan type, applying to students who lived in England and started an undergraduate course on or after 1 August 2023. Plan 5 was introduced as part of reforms to the student finance system and carries a longer write-off period of 40 years, compared with 30 years for Plan 2. The repayment threshold is set at £25,000.
Postgraduate loans are available for Master's and Doctoral courses. Repayments are calculated separately from undergraduate loans at a rate of 6% of income above the postgraduate threshold. If you have both an undergraduate and a postgraduate loan, you will make separate repayments for each — 9% above your undergraduate threshold and 6% above the postgraduate threshold.
You only start repaying your student loan when your income exceeds the threshold for your plan type. Below the threshold, you pay nothing at all.
| Plan Type | Annual Threshold | Monthly Threshold | Weekly Threshold |
|---|---|---|---|
| Plan 1 | £24,990 | £2,082 | £480 |
| Plan 2 | £27,295 | £2,274 | £524 |
| Plan 4 | £31,395 | £2,616 | £603 |
| Plan 5 | £25,000 | £2,083 | £480 |
| Postgraduate | £21,000 | £1,750 | £403 |
Student loan repayments are calculated at 9% of your gross income above the repayment threshold for your plan type (6% for postgraduate loans). This calculation is done on a per-pay-period basis — so if you are paid monthly, the threshold is divided by 12 and repayments are based on that month's earnings.
If your income drops below the threshold in any pay period, no repayment is deducted for that period. This means your repayments automatically adjust if your income fluctuates — for example, if you work variable hours or receive a pay rise mid-year.
Repayments begin from the April after you leave your course or the April after you reach the threshold, whichever is later. For most graduates who start working in the autumn after graduating, this means repayments begin the following April. If you are still studying, no repayments are taken even if you have a part-time job that pays above the threshold — you need to inform the SLC that you are still studying.
If you are self-employed, your student loan repayments are calculated through your Self Assessment tax return rather than through PAYE. HMRC will calculate your repayment based on your taxable profits for the year and include it in your tax bill.
The repayment rate is the same — 9% of your income above the threshold — but the calculation is based on your annual profits rather than monthly or weekly earnings. This means you will make a single annual payment (or payments on account) rather than monthly deductions from your pay.
You can make voluntary repayments at any time to pay off your student loan faster. However, whether this is a good idea depends on your individual circumstances.
All student loans are eventually written off if they have not been repaid in full within a certain period. The write-off period depends on your plan type:
| Plan Type | Write-Off Period |
|---|---|
| Plan 1 | 25 years after the April you were first due to repay, or when you reach age 65 (whichever comes first) |
| Plan 2 | 30 years after the April you were first due to repay |
| Plan 4 | 30 years after the April you were first due to repay, or when you reach age 65 (whichever comes first) |
| Plan 5 | 40 years after the April you were first due to repay |
| Postgraduate | 30 years after the April you were first due to repay |
When a loan is written off, the remaining balance is cancelled and you owe nothing further. There is no tax liability on the written-off amount. The write-off is automatic — you do not need to apply for it.
Interest is charged on your student loan from the moment the first payment is made to your university or into your bank account. The interest rate varies depending on your plan type and, for Plan 2, your income level.
Interest is charged at the lower of the Bank of England base rate plus 1%, or the rate of RPI (Retail Prices Index) inflation. This typically results in a relatively low interest rate.
While studying and until the April after you leave your course, interest is charged at RPI plus 3%. After that, the rate depends on your income — at incomes at or below the repayment threshold, it is RPI only, rising on a sliding scale to RPI plus 3% for those earning £49,130 or more. This means higher earners pay a higher rate of interest.
Interest on Plan 5 loans is set at RPI only (no additional percentage). This is a significant difference from Plan 2 and means that Plan 5 loans accrue interest more slowly in real terms.
If you have loans on more than one plan type — for example, a Plan 1 undergraduate loan and a postgraduate loan — you will make separate repayments for each. The repayments are calculated independently, each using its own threshold and rate.
Your employer will deduct the correct amount for each loan through PAYE. You should see separate deduction lines on your payslip if you have multiple loans. If you believe your employer is deducting too much, contact the SLC to check your records.
If you have both a Plan 2 and a Plan 4 loan (which is uncommon but possible), your repayments are taken on the plan with the lowest threshold first. Once that loan is repaid, repayments switch to the other plan. The SLC will manage this process automatically.
Student loans do not appear on your credit report and do not affect your credit score. However, when you apply for a mortgage, lenders will take your student loan repayments into account as part of their affordability assessment.
Lenders look at your net disposable income after all regular outgoings, and student loan repayments reduce the amount available. This means a student loan can reduce the maximum mortgage you are offered, even though it does not affect your creditworthiness. The impact depends on your salary and the size of your repayment — for higher earners with large Plan 2 balances, the reduction can be meaningful.
If you move abroad, you are still legally required to repay your student loan. However, repayments are no longer collected through PAYE. Instead, you must contact the Student Loans Company to set up a repayment arrangement based on your overseas income.
The SLC sets overseas income thresholds for each country, adjusted for the cost of living in that country. This means the threshold may be higher or lower than the UK threshold depending on where you move. You are required to provide evidence of your income annually and make monthly or quarterly repayments directly to the SLC.
Failing to keep the SLC informed of your overseas address and income can result in fixed monthly repayments being imposed, which may be higher than what you would otherwise pay. In extreme cases, the SLC can take legal action to recover the debt. It is essential to stay in contact with the SLC if you move abroad, even temporarily.
The UK student loan system is designed to be manageable and fair, with repayments linked to your income rather than the size of your debt. Key points to remember:
Use our free student loan calculator to work out your monthly and annual repayments based on your salary and plan type.