How Student Loan Repayment Works in the UK: The Short Version
If you earn above your plan threshold, you repay 9% of everything over that line — for 2026/27 that threshold is £29,385 on Plan 2, £25,000 on Plan 5 and £26,900 on Plan 1. That is honestly the heart of how student loan repayment works UK: it behaves like a 9% graduate tax, not a normal loan.
Nothing comes out of your pay until you cross your threshold. Earn less, and you repay nothing — no bailiffs, no missed-payment marks, no damage to your credit file. Earn more, and the slice grows with your salary. Your employer takes it through PAYE alongside tax and National Insurance, so most people never have to lift a finger.
The Five Plans (and Why Yours Matters)
Your plan type depends on when and where you studied, and each one has its own threshold, interest rate and write-off date. Getting yours wrong is the number one reason graduates miscalculate what they owe.
- Plan 1 — started before September 2012 in England or Wales, or studied in Northern Ireland. Threshold £26,900. Written off 25 years after repayments were first due.
- Plan 2 — started between 2012 and July 2023 in England or Wales. Threshold £29,385. Written off after 30 years.
- Plan 4 — studied in Scotland. Threshold £33,795. Written off after 30 years.
- Plan 5 — started on or after August 2023 in England. Threshold £25,000. Written off after 40 years.
- Postgraduate Loan — master’s or PhD funding. Threshold £21,000, repaid at 6% instead of 9%, and it runs alongside any undergraduate plan.
Interest differs too. Plan 5 charges RPI inflation only. Plan 2 adds up to 3% on top of RPI while you study, then scales with your income afterwards. Scary balances on paper? Often. But remember the write-off: a huge share of Plan 2 and Plan 5 borrowers will never clear the full balance, which is exactly why the monthly repayment — not the headline debt — is the number that matters.
A Worked Example on a £40,000 Salary
Say you’re on Plan 2 earning £40,000 a year. Subtract the £29,385 threshold and you’re left with £10,615 of income above the line. Nine per cent of that is roughly £955 a year, or about £80 a month, leaving your payslip automatically.
Drop your salary to £28,000 and the repayment falls to zero — you’re under the threshold, end of story. Get promoted to £55,000 and you’d repay about £2,305 a year. Notice the pattern? The payment tracks your earnings, never the size of your balance. Two graduates owing £30,000 and £60,000 pay exactly the same amount on the same salary. Once that sinks in, you’ve genuinely understood how student loan repayment works UK-wide.
Self-Employed? It Runs Through Self Assessment
Freelancers and sole traders don’t escape the system — they just meet it once a year instead of monthly. Your repayments are calculated on your tax return, based on total income above the threshold, and collected by HMRC with your tax bill. One trap catches people out: if you have both a job and side income, PAYE and Self Assessment can overlap, and it’s on you to spot a double charge and claim the overpayment back from the Student Loans Company.
Should You Overpay or Clear It Early?
For most borrowers, the honest answer is no. Because of the write-off, extra payments often just hand money to a loan that time would have erased anyway. Overpaying only tends to make sense if you’re a high earner on track to clear the balance in full before the write-off date — run the numbers first, because money paid in can’t be refunded. A bigger pension contribution or a house deposit usually beats a voluntary student loan overpayment.
The Bottom Line
Think of it as a 9% levy on earnings above a threshold, lasting a fixed number of years — not a debt that follows you around. Check your plan type, know your threshold, and plan your budget around the payslip deduction. If you want to model different salaries, a loan repayment calculator will show you the monthly figure in seconds.
FAQs
How does student loan repayment work in the UK if I earn under the threshold?
That’s how student loan repayment works UK rules in practice: if your income is below your plan threshold, repayments are zero — nothing is deducted and nothing is owed for that period. Repayments only start on income above the threshold (£29,385 for Plan 2, £25,000 for Plan 5 in 2026/27), and they restart automatically if your pay falls.
Does a student loan affect my credit score or a mortgage application?
A student loan never appears on your UK credit file and cannot lower your credit score. Mortgage lenders do, however, count the monthly repayment as a committed expense when they assess affordability, so a £80–£150 monthly deduction can slightly reduce the amount a lender offers you.
When is a student loan written off in the UK?
The write-off depends on your plan: Plan 1 loans are cancelled 25 years after repayments were first due, Plan 2 and Plan 4 after 30 years, Plan 5 after 40 years, and Postgraduate Loans after 30 years. Any remaining balance disappears in full, with nothing more to pay.
Can I repay my student loan early?
You can make voluntary overpayments to the Student Loans Company at any time, but voluntary payments are non-refundable. Early repayment only pays off if you would otherwise clear the whole balance before the write-off date; for most graduates, the loan expires first, making overpayments wasted money.
What happens to my student loan if I move abroad?
If you move abroad, you must tell the Student Loans Company and repay directly, because UK PAYE deductions stop. Repayment thresholds are set country by country to reflect local living costs, and you pay a fixed monthly amount based on your overseas income instead of a percentage through your employer.
