A UK student loan is fundamentally different from a bank loan or credit card. You can't miss a repayment, default on it, or have bailiffs knock on your door. It doesn't appear on your credit file. And — crucially — if you never earn enough to repay it in full, it is written off after a set number of years.
This is why financial experts often describe UK student loans as a graduate tax rather than a traditional debt. You pay 9% of your income above a threshold, collected automatically through payroll, for as long as you earn above that threshold. If your income falls below the threshold for a month, you pay nothing that month.
Understanding this distinction is essential for making good decisions about repayment — particularly whether to make voluntary overpayments.
Your repayment plan depends on when and where you studied. Here's a quick guide:
| Plan | Who Is On It | Repayment Threshold 2026/27 | Write-Off Period |
|---|---|---|---|
| Plan 1 | Students from England/Wales who started before September 2012; Scottish and NI graduates | £24,990 | 25 years or age 65 |
| Plan 2 | Students from England/Wales starting September 2012 – July 2023 | £27,295 | 30 years |
| Plan 5 | Students from England starting August 2023 onwards | £25,000 | 40 years |
| Postgraduate | Master's and doctoral loans in England/Wales from 2016 | £21,000 | 30 years |
If you're unsure which plan you're on, check your Student Loans Company account. Many people graduate and assume they're on Plan 2 when they're actually on Plan 1 (which has a lower threshold but also shorter write-off).
You repay 9% of income above the threshold for Plan 1, 2 and 5. For postgraduate loans it's 6%. The repayments are deducted automatically through PAYE — your employer doesn't need to do anything special, and you don't have to manage it yourself.
Threshold: £27,295/year = £2,274/month.
If you earn £35,000/year (£2,917/month): monthly repayment = (£2,917 − £2,274) × 9% = £643 × 9% = £57.87/month
Annual repayment: £694. Your loan balance continues to accrue interest on the portion you haven't repaid.
If you have both an undergraduate and a postgraduate loan, you repay both simultaneously — 9% for the undergraduate plan plus 6% for the postgraduate loan, both calculated on the same threshold basis.
Enter your salary and loan plan to see your exact monthly deductions and repayment timeline.
Use the Student Loan Calculator →Student loan interest in the UK is linked to inflation, not a fixed commercial rate. This makes it very different from a mortgage or personal loan — but it also means your debt can grow significantly in high-inflation years.
| Plan | Interest Rate (2025–26) | How It Works |
|---|---|---|
| Plan 1 | Lower of RPI or Bank Rate + 1% | Currently 4.3%. Capped to prevent runaway growth. |
| Plan 2 (below threshold) | RPI only | Currently ~3.1%. Applies while earning below £27,295. |
| Plan 2 (above £49,130) | RPI + 3% | Currently ~6.1%. Tapers between threshold and £49,130. |
| Plan 5 | RPI only | No income-linked premium — same rate regardless of earnings. |
| Postgraduate | RPI + 3% | Applied from day one of the loan. |
Rates are updated every September. The RPI figure used is from the March preceding the new academic year. In practice, this means your interest rate can change significantly year to year.
Key insight: For many Plan 2 graduates, the interest accruing on their loan is greater than their annual repayments — especially in early career years. This means their balance grows despite making repayments. This is entirely normal and does not affect how much you actually pay: your repayments are always fixed at 9% of income above the threshold, regardless of balance size.
The write-off date is one of the most misunderstood aspects of student loans. Many people assume their debt will hang over them forever — it won't.
If you die, the loan is written off. If you are permanently disabled and unable to work, you may be eligible for early cancellation. These write-offs are not taxable income — you don't get a tax bill when the debt disappears.
This is the question graduates agonise over most — and the answer depends on your projected lifetime earnings.
If you're unlikely to repay your full loan balance before the write-off date (which applies to the majority of Plan 2 graduates), then every voluntary overpayment just reduces the amount that gets written off. You're effectively giving HMRC free money that would otherwise have disappeared.
Financial modelling suggests only around 25–30% of Plan 2 graduates will repay in full. For the remaining 70–75%, overpaying is a net loss.
Before overpaying: Check your projected balance at write-off using our calculator. If your projected remaining balance at write-off is significant, overpaying early-career is almost always suboptimal. Consider investing that money in an ISA or pension instead.
Student loan repayments do affect your mortgage affordability, because they reduce your take-home pay — and lenders assess what you can afford based on your net income after all deductions.
If you earn £40,000 on Plan 2, your student loan takes £1,144/year (£95/month). That reduction in disposable income will reduce the amount a lender is willing to offer. However, student loans do not appear on your credit file, and they don't directly affect your credit score.
See our guide to mortgage affordability for a detailed look at how lenders calculate what you can borrow, and use the mortgage affordability calculator to model your specific situation.
Olivia graduated in 2022. She earns £32,000. Annual repayment: (£32,000 − £27,295) × 9% = £4,705 × 9% = £423/year.
Interest (RPI ~3.1%, plus taper): approximately 4% = £1,800/year added to her balance.
Net balance change: +£1,377 per year. Her balance is growing despite making repayments.
Verdict: Unless she earns significantly more over time, she'll reach write-off in 30 years with a substantial balance remaining. Overpaying now would likely be wasted money.
Daniel is a software engineer earning £75,000. Annual repayment: (£75,000 − £27,295) × 9% = £47,705 × 9% = £4,293/year.
At this repayment rate, he'd clear a £45,000 balance (with interest) in approximately 13–15 years — well within the 30-year window.
Verdict: Daniel is a high earner who will repay in full. He should consider whether early repayment makes sense relative to other uses of money (ISA, mortgage overpayment).
Sophie started university in 2023, graduating in 2026. Plan 5 threshold: £25,000. Annual repayment: (£28,000 − £25,000) × 9% = £3,000 × 9% = £270/year.
With a £60,000+ balance and only £270/year in repayments, her balance will grow for decades. Plan 5 has a 40-year write-off — she'll be in her mid-60s when it clears.
Verdict: Almost certainly never repays in full. Treat it entirely as a graduate tax and focus on other financial goals.
See your exact salary after income tax, National Insurance and student loan deductions.
Use the Salary Calculator →