UK Student Loan Plans: Thresholds, 9%, Interest and Write-Off
A UK student loan is repaid through PAYE or self-assessment at 9% of income above a threshold set by your repayment plan, not by the amount borrowed. Plan 1 (pre-2012 loans in England and Wales, and Northern Ireland) repays above £26,900 in 2026-27; Plan 2 (England and Wales, 2012 to 2023) above £29,385; Plan 4 (Scotland) above £33,795; and Plan 5 (England, courses from August 2023) above £25,000. Postgraduate loans repay 6% above £21,000.
Repayment behaves like a tax on income, not like a debt. Earn £35,000 on Plan 2 and you repay 9% of the £5,615 above the threshold — about £42 a month — whatever the balance is, and nothing at all in a year you earn under the threshold. The employer deducts it through PAYE from the April after you finish the course; the self-employed pay it through self-assessment.
Interest is where the plans differ most. Plan 1 and Plan 4 charge the lower of RPI and base rate plus 1%, 4.1% from September 2026; Plan 5 charges RPI only, also 4.1%; Plan 2 charges RPI plus up to 3% depending on income, 6% at the top. For most Plan 2 graduates the interest outruns the repayments, so the balance grows for years — which matters less than it looks, because of the write-off.
Every plan is cancelled after a fixed period: 25 years for Plan 1, 30 years for Plan 2 and Plan 4, and 40 years for Plan 5, counted from the April you were first due to repay. Government modelling expects most Plan 2 borrowers never to clear the loan before write-off, which turns the question from 'how do I pay this off' into 'how much will I pay in total before it is cancelled'.
That is why overpaying is usually wrong for Plan 2 and right only for high earners who will clear the balance well inside 30 years. A graduate on £70,000 will repay in full and pays 6% interest on the way, so extra payments save real money; a graduate on £35,000 will be written off owing more than they borrowed, and every voluntary pound is a pound given away. Plan 5, with its 40-year term and lower threshold, shifts more people into the 'will repay in full' group.
The Plan 2 threshold is frozen at £29,385 until 2029-30 rather than rising with earnings, so graduates drift into repaying more each year — the same fiscal drag as the personal allowance. Check your plan on your Student Loans Company account, make sure your employer has the right plan on your payslip, and treat the 9% as part of your marginal rate when comparing a pay rise, a pension contribution or a move to self-employment.
Richify models your plan's repayments, interest and write-off date against your salary path, so you can see whether you are a 'will repay in full' borrower for whom overpaying makes sense.
