Student loan repayments confuse almost every UK graduate. The money leaves your pay automatically each month, but nobody really explains the mechanics: which plan you are on, when repayments start, or how much you will actually pay. This guide covers the 2026/27 tax year (6 April 2026 to 5 April 2027) — the five plans, their thresholds, and worked examples.
The graduate tax analogy: why it is not really a loan
Forget everything you know about normal loans. A student loan does not work like a mortgage or a credit card. A better analogy: it is a graduate tax that only switches on when you earn enough, and switches itself off after a set number of years.
With a normal loan, you owe a fixed amount and must repay it whatever happens. With a UK student loan, you repay 9% of your earnings above a threshold — and only above the threshold. Earn below it and you pay nothing, even if you owe £50,000. And after 25 to 40 years (depending on your plan), whatever is left is written off entirely. Most graduates will never repay in full, which means for most people the total paid depends on earnings, not on the amount borrowed.
The five plans at a glance
Which plan you are on depends on when and where you studied:
| Plan | Who | Annual threshold 2026/27 | Repayment rate |
|---|---|---|---|
| Plan 1 | Started before Sept 2012 (England/Wales), or Northern Ireland | £26,900 | 9% |
| Plan 2 | Started Sept 2012 – July 2023 (England/Wales) | £29,385 | 9% |
| Plan 4 | Scotland (any start date) | £33,795 | 9% |
| Plan 5 | Started Aug 2023 onwards (England) | £25,000 | 9% |
| Postgraduate Loan | Master’s/Doctoral loans | £21,000 | 6% |
Not sure which plan you are on? Check your payslip — it usually shows a code like “SL1” or “SL2” next to the deduction. You can also log in to your Student Loans Company account.
The river dam analogy: how the 9% actually works
Picture a dam across a river. Water (your salary) flows toward it. Everything below the top of the dam (the threshold) passes underneath untouched. Only the water that spills over the top is collected — at 9%.
This is the crucial point most people get wrong. If you earn £35,000 on Plan 2 (threshold £29,385), you do not pay 9% of £35,000 (£3,150). You pay 9% of the £5,615 above the threshold: £505.35 a year, about £42 a month. The first £29,385 is completely untouched.
Worked example 1: £35,000 on Plan 2
Dan graduated in 2018, so he is on Plan 2 (threshold £29,385):
- Earnings above threshold: £35,000 − £29,385 = £5,615
- Repayment: £5,615 × 9% = £505.35 a year (about £42.11 a month)
For context, his income tax is £4,486 and his NI is £1,794.40 — the student loan is by far his smallest deduction. See the full picture on our take-home pay calculator.
Worked example 2: £35,000 on Plan 1
Priya started university in 2010, so she is on Plan 1 (threshold £26,900):
- Earnings above threshold: £35,000 − £26,900 = £8,100
- Repayment: £8,100 × 9% = £729 a year (about £60.75 a month)
Same salary as Dan, but Priya pays about £224 a year more — purely because Plan 1’s threshold is lower. Your plan matters as much as your pay.
Worked example 3: £35,000 with a Postgraduate Loan too
Aisha has an undergraduate Plan 2 loan and a Master’s loan. The two run side by side:
- Plan 2: (£35,000 − £29,385) × 9% = £505.35
- Postgraduate: (£35,000 − £21,000) × 6% = £840
- Combined: £1,345.35 a year (about £112 a month)
If you hold both an undergraduate and a postgraduate loan, both deductions apply at the same time — an effective 15% on income above the relevant thresholds.
Worked example 4: £30,000 on Plan 5
Tom started his degree in 2024, so he is on Plan 5 (threshold £25,000, frozen):
- Earnings above threshold: £30,000 − £25,000 = £5,000
- Repayment: £5,000 × 9% = £450 a year (about £37.50 a month)
Plan 5 has the lowest threshold, so repayments start earliest — but the loan is written off after 40 years, the longest of any plan.
Should you overpay your student loan?
For most graduates, the honest answer is no — and here is why. If your salary path means the loan will be written off with a balance still outstanding (true for the majority of Plan 2 and Plan 5 borrowers), then every extra pound you pay voluntarily is money that would otherwise have been forgiven. It is effectively a donation to the Treasury.
Analogy: imagine a taxi meter that stops running after 30 minutes no matter how far you have travelled. Paying the driver extra to “get there faster” does not change your arrival — the meter was going to stop anyway. Only overpay if you are confident you will clear the full balance before the write-off date, which usually means consistently high earnings for decades.
What about the interest?
Student loan interest (linked to inflation, RPI) is added to your balance each year, but it does not change your monthly repayment — that is always 9% (or 6%) of income above the threshold. Interest only affects how fast the balance grows, and therefore how much eventually gets written off versus repaid. For most borrowers, the interest rate is largely irrelevant to what leaves their pay packet.
A note on the Autumn Budget
The Chancellor’s Autumn Budget on 28 October 2026 could announce changes to student loan thresholds or terms — Plan 5’s frozen £25,000 threshold is often discussed. Check back after Budget day for the latest figures.
Frequently asked questions
How much student loan do I pay on £35,000?
On Plan 2: £505.35 a year (9% of the £5,615 above the £29,385 threshold). On Plan 1: £729 a year. With a postgraduate loan as well, add £840 a year at 6%.
Which student loan plan am I on?
It depends on when and where you studied: before September 2012 (England/Wales) is Plan 1; September 2012 to July 2023 is Plan 2; Scotland is Plan 4; August 2023 onwards (England) is Plan 5. Check your payslip for the deduction code.
Do I pay student loan if I earn below the threshold?
No. If your earnings are below your plan’s threshold you pay nothing at all — not a penny — regardless of how much you borrowed.
Is a student loan like normal debt?
No. It does not appear on your credit file, repayments are purely income-based, and the balance is written off after 25–40 years depending on the plan. Think of it as a graduate tax, not a loan.
What happens to my student loan if I move abroad?
You still have to repay. The Student Loans Company sets thresholds based on the cost of living in your new country, and you repay 9% of earnings above that threshold. Tell them when you leave the UK.
