How student loan repayments work
Student loan repayments in the UK are not like a bank loan. You do not make fixed monthly payments regardless of income. Instead, repayments are calculated as a percentage of your earnings above a threshold, deducted through PAYE alongside income tax and National Insurance. If you earn below the threshold, you pay nothing. If your income fluctuates, your repayments fluctuate with it.
| Plan | Annual threshold | Monthly threshold | Rate | Write-off |
|---|---|---|---|---|
| Plan 1 | £26,900 | £2,082 | 9% | Age 65 / 25 years |
| Plan 2 | £29,385 | £2,274 | 9% | 30 years after graduation |
| Plan 4 | £31,395 | £2,616 | 9% | Age 65 / 30 years |
| Plan 5 | £25,000 | £2,083 | 9% | 40 years after graduation |
| Postgraduate | £21,000 | £1,750 | 6% | 30 years after graduation |
Plan 2 borrowers and the write-off: Most Plan 2 borrowers with typical graduate salaries will never fully repay their loan before the 30-year write-off. For these borrowers, the student loan functions more like a graduate tax than a conventional debt, a capped repayment period regardless of the outstanding balance. Overpaying or making voluntary extra payments is rarely financially rational for Plan 2 borrowers unless they have very high income and are certain to repay in full.
Frequently asked questions
For Plan 2 and Plan 5 borrowers especially, voluntary overpayments are generally not advisable unless you are confident you will repay the full balance before the write-off date. If your loan will be written off before you clear it (as is the case for most Plan 2 borrowers on average graduate salaries), every pound of voluntary repayment is a pound that would otherwise have been written off for free. For Plan 1 borrowers with smaller balances, or high earners who are projected to clear the loan quickly, overpayment can save interest. Run the numbers with your actual balance and interest rate first.
Your obligation to repay continues if you move abroad. The Student Loans Company sets overseas repayment thresholds based on the cost of living in your country of residence. You are required to notify SLC and will receive a repayment schedule based on your overseas income. The thresholds and repayment amounts vary significantly by country. Failing to notify SLC or making payments at the correct level while abroad results in penalties and interest accruing.
Yes, and both are repaid simultaneously. Plan 2 repayments are 9% of income above £29,385 and postgraduate repayments are 6% of income above £21,000. They are calculated separately and both are deducted through PAYE. If both thresholds apply, you could be repaying up to 15% of your above-threshold income in combined student loan deductions. This is a significant amount, roughly equal to a basic rate taxpayer paying an extra 15p in the pound on earnings above the postgraduate threshold.
Yes. Student loan repayments are calculated on your taxable gross pay, which is reduced by salary sacrifice arrangements. If you sacrifice £5,000 per year into a pension, your student loan is calculated on the lower salary. For a Plan 2 borrower earning £40,000 who sacrifices £5,000 to a pension, the student loan repayment drops from £1,143 to £693 per year. This is one of the less-discussed benefits of pension salary sacrifice, particularly valuable for borrowers close to the write-off threshold who want to reduce repayments without overpaying.
Related calculators
Tax Toolkit UK provides free calculators for guidance purposes only. Projections assume static salary and interest rate. Individual circumstances vary considerably. Always verify your balance and repayment details with the Student Loans Company.