The UK student loan system is famously complex. Instead of acting like a traditional bank loan, a student loan behaves much more like a time-limited graduate tax. Your repayments are calculated strictly as a percentage of what you earn above a set threshold, rather than what you originally borrowed. With five distinct plans currently active, understanding your plan's specific rules is key to managing your income.

Current Repayment Thresholds (2026/27 Tax Year)

You only repay 9% of your gross income that exceeds the threshold of your designated plan:

• Plan 1: £26,900 per year (approx. £2,241 per month)
• Plan 2: £29,385 per year (approx. £2,448 per month)
• Plan 4 (Scotland): £33,795 per year (approx. £2,816 per month)
• Plan 5: £25,000 per year (approx. £2,083 per month)

Key Differences Between the Most Common Plans

Plan 2 (English & Welsh loans started 2012–2023):

• The repayment threshold is fixed at £29,385 for the 2026/27 year.
• Interest is capped at a maximum of 6% starting September 2026.
• Any remaining balance is completely written off and cancelled 30 years after you become eligible to repay.

Plan 5 (New undergraduate loans starting September 2023 onwards):

• Has a lower repayment threshold of £25,000, meaning you start repaying sooner on lower incomes.
• Interest is pegged strictly to the Retail Price Index (RPI), with no additional interest charged.
• The outstanding balance is written off after 40 years instead of 30, meaning most graduates will pay significantly more over their working lifetimes.

Should You Make Extra Voluntary Repayments?

For the vast majority of borrowers, making voluntary overpayments is a bad financial decision. Because the loan is written off entirely after 30 or 40 years, any voluntary payments you make on lower-to-middle incomes will not save you money—they simply reduce a balance that would have been cancelled anyway.

Only consider voluntary overpayments if you are an exceptionally high earner who is mathematically projected to fully pay off the entire balance before the write-off date arrives. Otherwise, treat your student loan as a standard graduate contribution.

How to Model Your Student Loan Repayments

To see how your salary growth, inflation, and Plan type affect your lifetime repayments, use our interactive UK Student Loan Repayment Tool. Simply enter your loan details and projected salary path to simulate your repayment curve and write-off projections.