How Does Student Loan Repayment Work in the UK?
Student loan repayment confuses almost everyone. You don't repay a fixed amount each month — it works more like a graduate tax. Here's how the system actually works, which plan you're on, and whether paying it off early is worth it.
The Quick Answer
You repay 9% of income above a threshold (£29,385 for Plan 2 in 2026/27). Repayments are automatic via PAYE. If you earn under the threshold, you pay nothing. After 25–40 years (depending on plan), any remaining balance is written off. Most graduates never repay the full amount.
How Student Loan Repayment Works
Unlike a mortgage or car loan, student loan repayments are tied to your income, not the amount you borrowed. You pay 9% of everything you earn above your plan's threshold:
Worked Example: £35,000 Salary on Plan 2
- Salary: £35,000
- Plan 2 threshold (2026/27): £29,385
- Amount above threshold: £35,000 − £29,385 = £5,615
- Annual repayment: 9% × £5,615 = £505/year
- Monthly deduction: £42/month
Repayments are deducted automatically through PAYE if you're employed. Self-employed graduates report income and repay via their tax return.
Plan 1 vs Plan 2 vs Plan 5
There are three main undergraduate plans, plus a separate postgraduate plan. Here's how they compare:
| Feature | Plan 1 | Plan 2 | Plan 5 |
|---|---|---|---|
| Who | England/Wales pre-2012, Scotland, NI | England/Wales 2012–2023 | England from Sept 2023 |
| Threshold (2026/27) | £26,900 | £29,385 | £25,000 |
| Repayment rate | 9% | 9% | 9% |
| Interest rate | Lower of RPI or base rate +1% | RPI to RPI +3% | RPI only (capped) |
| Max tuition fees | £3,375/year | £9,250/year | £9,250/year |
| Write-off period | 25 years | 30 years | 40 years |
Not sure which plan you're on? Check your Student Loan Balance online or use our Student Loan Calculator.
When Is Your Student Loan Written Off?
Unlike commercial debt, student loans are automatically cancelled after a fixed period. The write-off date depends on your plan:
- Plan 1: 25 years after the April you were first due to repay
- Plan 2: 30 years after the April you were first due to repay
- Plan 5: 40 years after graduation
- Postgraduate Loan: 30 years after the April you were first due to repay
The write-off is not taxable income and doesn't affect your credit score. For many Plan 2 graduates, especially those earning under £40,000–£50,000, the loan will be written off with a significant balance remaining.
Should You Pay Off Your Student Loan Early?
This is the most common question graduates ask — and the answer is usually no. Here's why:
❌ Don't repay early if...
- You won't repay the full balance before write-off
- You earn under £40,000–£50,000 (Plan 2)
- You have other debts at higher rates
- You don't have an emergency fund
✅ Consider repaying early if...
- You're a high earner (£60,000+) who will clear the balance
- You're close to paying it off anyway
- The interest rate exceeds what you'd earn on savings
- You want to maximise mortgage borrowing
Model your exact situation with our Student Loan Calculator to see whether you'll repay in full or have the balance written off.
How Student Loans Affect Mortgage Applications
While student loans don't appear on your credit report, they do reduce your take-home pay — and that matters to mortgage lenders. Most lenders include student loan repayments in their affordability calculations.
For a graduate earning £35,000 on Plan 2, monthly repayments of £58 could reduce mortgage borrowing capacity by roughly £10,000–£15,000. This is worth factoring in when planning a property purchase.
Use our Mortgage Affordability Calculator to see how student loan repayments affect what you can borrow.
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