Student Loan Repayment: Plan 1, Plan 2, and Plan 5 Compared
UK student loans work more like a graduate tax than a conventional debt. Repayments are income-contingent — you pay a percentage of earnings above a threshold, not a fixed monthly amount. Whether you repay in full, partially, or never depends on your income trajectory over the loan term.
The Three Plans at a Glance (2025/26)
| Feature | Plan 1 | Plan 2 | Plan 5 |
|---|---|---|---|
| Who has it | Pre-2012 England/Wales; Scotland; NI | England/Wales 2012–2023 | England 2023 onwards |
| Repayment threshold | £26,065/year | £27,295/year | £25,000/year |
| Repayment rate | 9% above threshold | 9% above threshold | 9% above threshold |
| Interest rate | RPI or BoE base + 1% (lower of) | RPI to RPI+3% (income-linked) | RPI only |
| Write-off | 25 years or age 65 | 30 years | 40 years |
The Repayment Formula
Monthly Repayment = (Annual Salary − Threshold) × 9% ÷ 12 Plan 2 example, salary £40,000: Monthly = (£40,000 − £27,295) × 0.09 ÷ 12 = £95.29/month Plan 5 example, same salary: Monthly = (£40,000 − £25,000) × 0.09 ÷ 12 = £112.50/month
What-If Scenarios
Scenario 1: Moderate earner — will they repay in full?
Plan 2, starting salary £28,000, growing 3%/year, debt £50,000
| Year | Salary | Annual Repayment | Balance (approx) |
|---|---|---|---|
| 1 | £28,000 | £63 | £52,400 |
| 5 | £32,440 | £460 | £57,200 |
| 15 | £43,590 | £1,464 | £58,100 |
| 30 | £65,840 | £3,472 | Written off: ~£42,000 remaining |
This borrower never repays in full. Total repaid: ~£28,000 of a £50,000 debt.
Scenario 2: High earner — overpays early?
Plan 2, salary quickly reaching £70,000+. Could repay in full within 10–15 years. Voluntary overpayments reduce balance but attract no interest benefit if you'd repay anyway. If likely to clear within 30 years, overpayment may make sense; otherwise, the write-off is free.
Scenario 3: Plan 5 — the 40-year trap
Plan 5's 40-year term means many graduates will be repaying into their 60s. On a £60,000 starting debt with modest salary growth, total repayments can exceed the original debt — yet significant balances may still be written off. High earners repay more in total.
Should You Make Voluntary Overpayments?
Voluntary repayments make sense only if:
- You are confident you will repay the full balance within the write-off period anyway
- The interest rate exceeds what you could earn saving or investing
- Your income projections are high enough to clear the debt before write-off
For most Plan 2 and Plan 5 borrowers, voluntary overpayments are not recommended.
Frequently Asked Questions
→ See how student loan deductions affect your take-home with the Salary Calculator
Indicative only. Student loan rules, interest rates, and thresholds change annually. Check the official Student Loans Company for current figures.