Student Loan Repayment in England: What Changes? What Stays?

What Plan Are You On?

Student loan repayment in England is currently split between two main repayment plans, determined entirely by when you started your course. There is no choice of plan; it is set by your start date.

If you started an undergraduate course in England between 1 September 2012 and 31 July 2023, you are on Plan 2^[1]. If you started your course on or after 1 August 2023, you are on Plan 5^[2].

The first cohort of Plan 5 borrowers became liable to repay from April 2026, which is the Statutory Repayment Due Date after completing their courses^[3]. This means 2026 is the first year the new system has been active, and many recent graduates will be seeing deductions from their pay for the first time.

How Repayment Works: The Same for Everyone

Despite the differences between the two plans, the basic mechanics of repayment are identical. Understanding these rules can help you know what to expect.

You repay 9% of your income above a threshold

On both plans, you repay 9% of your income above a set threshold^[6]. This is calculated on your income, not on how much you owe. The interest rate does not affect your monthly repayment amount, it only affects how long it takes to clear the balance^[11].

For example, on Plan 2 with a salary of GBP 35,000, you would repay: (GBP 35,000 - GBP 29,385) x 0.09 = GBP 505.35 per year, which is approximately GBP 42 per month^[6].

Repayments are deducted automatically

If you are employed, repayments are taken from your salary through PAYE by your employer, alongside tax and National Insurance. Your employer uses the correct plan type as notified by HMRC through an SL1 start notice^[8]. If you are self-employed or have additional untaxed income, you repay through the Self Assessment tax return, and HMRC calculates the amount based on your total income above the threshold^[9].

Repayments stop when you stop earning enough

If your income drops below the threshold at any point, repayments stop automatically. If you stop working, repayments stop. If you return to work later, they restart^[10][27]. There is no penalty for earning less.

'Repayments are calculated on your income, not on how much you owe. The interest rate does not affect your monthly repayment amount.'^[11]

What if you have a postgraduate loan too?

If you have both an undergraduate loan (Plan 2 or 5) and a Postgraduate Master's or Doctoral Loan, you repay 9% on the undergraduate portion plus 6% on the postgraduate portion, for a combined 15% of income above the postgraduate threshold of GBP 21,000^[7].

The Key Differences: Thresholds, Interest and Write-Off

This is where the two plans diverge. Understanding these differences can help you plan for the long term.

Repayment thresholds

The threshold is the amount you can earn before you start repaying. On Plan 2, the threshold is GBP 29,385 per year (GBP 2,448 per month, GBP 565 per week). This threshold is frozen until at least April 2030^[4]. On Plan 5, the threshold is GBP 25,000 per year (GBP 2,083 per month, GBP 480 per week). This threshold is fixed until at least the 2026-27 financial year, then increases annually with RPI^[5].

This means Plan 5 borrowers start repaying sooner (at a lower salary), but the threshold will rise over time with inflation.

Interest rates

This is the most significant difference between the two plans. Plan 5 is cheaper in interest terms, but has a longer repayment term.

On Plan 2, the interest rate is RPI (Retail Price Index) plus up to 3%, depending on your income. With the current RPI at 3.2%, this means:

• If you earn GBP 29,385 or less, the rate is RPI (3.2%)
• If you earn GBP 52,885 or more, the rate is RPI + 3% (6.2%)
• Between these thresholds, the rate slides proportionally^[12]
  
  

On Plan 5, the interest rate is RPI only (currently 3.2%), with no income-based variation^[13].

Interest is calculated daily and added to the balance each month (compound interest). This means interest is charged on top of previously accrued interest, which can cause the balance to grow if your repayments do not cover the interest being added^[14].

A temporary interest rate cap (September 2026 to August 2027)

A temporary 6% interest rate cap was introduced for Plan 2 and Plan 3 (Postgraduate) loans for the 2026/27 academic year, running from 1 September 2026 to 31 August 2027. If the standard rate (RPI + 3%) would exceed 6%, the rate is capped at 6%. Plan 5 is not affected as its rate is already RPI-only^[15].

The government stated the cap is designed to 'protect students and graduates from the potential of inflationary pressures due to the situation in the Middle East'^[16]. It is important to note that this is a temporary measure and may not be extended.

Loan write-off times

Both plans eventually write off any remaining balance, but the time periods differ. Plan 2 loans are written off 30 years after the April you were first due to repay^[17]. Plan 5 loans are written off 40 years after the April you were first due to repay^[18].

What About the Numbers?

The average loan balance for a higher education borrower entering repayment in 2025-26 was GBP 47,730 (provisional). This was a 9.9% decrease from the previous year, partly due to the first Plan 5 cohort entering repayment^[19].

Average borrowing per full-time undergraduate per year in 2025/26 is GBP 15,980 (GBP 8,920 tuition fee loan plus GBP 8,150 maintenance loan). Over a full course, the average total borrowing for 2025/26 starters is forecast at GBP 45,190^[20].

How many graduates repay in full?

According to government forecasts, 55% of full-time undergraduate borrowers starting in 2025/26 are expected to repay their loan in full. The median borrower is expected to repay their debt in 30 years. Average lifetime repayments are forecast at GBP 27,900 in 2025-26 prices, about 69% of the loan outlay in real terms^[21].

The top 30% of lifetime earners are expected to repay in full within the 40-year term. The lowest 10% of earners are forecast to repay only GBP 3,300 (8% of loan outlay)^[22].

It is worth remembering that these are forecasts, not guarantees. Plan 5 is a relatively new system, first repayments only began in April 2026, and actual repayment outcomes for Plan 5 borrowers will only become clear over time^[3].

Practical Things to Know

When does repayment actually start?

Repayment starts the April after you finish or leave your course, but only if your income is above the threshold. For example, if you graduate in June 2025, you would be due to start repaying from April 2026^[26]. If your income is below the threshold when that April arrives, repayments will not begin until your income rises above it.

Can you make extra voluntary repayments?

You can make extra voluntary repayments to the Student Loans Company at any time, and there is no penalty for early repayment. However, extra repayments cannot be refunded, once paid, they are gone^[23]. Whether or not to make extra repayments is a personal decision that depends on your individual circumstances. If you are considering it, the GOV.UK student loan repayment calculator and the MoneyHelper student loan calculator are both free to use.

What if you overpay through payroll?

You can get a refund if your total annual income over the full tax year was below the threshold for your plan. This can happen if a bonus or overtime pushed you over the monthly threshold for one month only. You must wait until after the tax year ends and request a refund through your online student loan account^[24].

What if you leave the UK?

If you leave the UK for more than 3 months, you must tell the Student Loans Company and update your employment details. Repayment thresholds differ by country to reflect local living costs. If you do not notify SLC, you may be charged a fixed monthly repayment (up to GBP 618.80) or face legal action^[25].

The Bottom Line

Student loan repayment in England is designed to be manageable. You only repay when you are earning enough, repayments are taken automatically, and the amount is based on your income, not on how much you owe. The balance is eventually written off if you have not cleared it within the repayment term.

The key differences between Plan 2 and Plan 5 come down to three things: the repayment threshold, the interest rate, and the write-off period. Your plan is determined by your course start date, and you cannot choose which one you are on.

If you want personalised calculations, the GOV.UK student loan repayment calculator and the MoneyHelper student loan calculator are both free to use.

Sources

[1] GOV.UK, "Repaying your student loan: What you pay"
https://www.gov.uk/repaying-your-student-loan/what-you-pay

[2] GOV.UK, "Student loans: a guide to terms and conditions 2026 to 2027"
https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

[3] GOV.UK, "Student loans: a guide to terms and conditions 2026 to 2027"
https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

[4] GOV.UK, "Student loans interest and repayment threshold announcement for Plan 2 and Plan 3"
https://www.gov.uk/government/news/student-loans-interest-and-repayment-threshold-announcement-for-plan-2-and-plan-3-loans

[5] GOV.UK, "Student loans: a guide to terms and conditions 2026 to 2027"
https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

[6] GOV.UK, "Repaying your student loan: What you pay"
https://www.gov.uk/repaying-your-student-loan/what-you-pay

[7] GOV.UK, "Repaying your student loan"
https://www.gov.uk/repaying-your-student-loan

[8] GOV.UK, "Special rules for student loans" (employer guidance)
https://www.gov.uk/guidance/special-rules-for-student-loans

[9] GOV.UK, "Tell HMRC about a student loan in your tax return"
https://www.gov.uk/guidance/tell-hmrc-about-a-student-loan-in-your-tax-return

[10] GOV.UK, "Repaying your student loan: When you start repaying"
https://www.gov.uk/repaying-your-student-loan/when-you-start-repaying

[11] House of Commons Library, "Student loans: Interest rates and repayment thresholds FAQs" (CBP-10654)
https://commonslibrary.parliament.uk/research-briefings/cbp-10654/

[12] GOV.UK, "How interest is calculated — Plan 2"
https://www.gov.uk/guidance/how-interest-is-calculated-plan-2

[13] House of Commons Library, "Student loans: Interest rates and repayment thresholds FAQs" (CBP-10654)
https://commonslibrary.parliament.uk/research-briefings/cbp-10654/

[14] GOV.UK, "Student loans: a guide to terms and conditions 2026 to 2027"
https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

[15] The Education (Student Loans) (Repayment) (Amendment) Regulations 2026 (SI 2026/743)
https://www.legislation.gov.uk/uksi/2026/743/made

[16] GOV.UK, "Interest rate cap introduced to protect Plan 2 borrowers"
https://www.gov.uk/government/news/interest-rate-cap-introduced-to-protect-plan-2-borrowers

[17] GOV.UK, "Repaying your student loan: When your student loan gets written off or cancelled"
https://www.gov.uk/repaying-your-student-loan/when-your-student-loan-gets-written-off-or-cancelled

[18] GOV.UK, "Student loans: a guide to terms and conditions 2026 to 2027"
https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

[19] Department for Education, "Student Loan Forecasts, England: 2025 to 2026"
https://www.gov.uk/government/statistics/student-loan-forecasts-england-2025-to-2026

[20] Department for Education, "Student Loan Forecasts, England: 2025 to 2026"
https://www.gov.uk/government/statistics/student-loan-forecasts-england-2025-to-2026

[21] Department for Education, "Student Loan Forecasts, England: 2025 to 2026"
https://www.gov.uk/government/statistics/student-loan-forecasts-england-2025-to-2026

[22] Department for Education, "Student Loan Forecasts, England: 2025 to 2026"
https://www.gov.uk/government/statistics/student-loan-forecasts-england-2025-to-2026

[23] GOV.UK, "Repaying your student loan: Make extra repayments"
https://www.gov.uk/repaying-your-student-loan/make-extra-repayments

[24] GOV.UK, "Repaying your student loan: Getting a refund"
https://www.gov.uk/repaying-your-student-loan/getting-a-refund

[25] GOV.UK, "Repaying your student loan if you leave the UK"
https://www.gov.uk/repaying-your-student-loan

[26] GOV.UK, "Repaying your student loan: When you start repaying"
https://www.gov.uk/repaying-your-student-loan/when-you-start-repaying

[27] GOV.UK, "Repaying your student loan"
https://www.gov.uk/repaying-your-student-loan