Tax Guide: Student Loan Repayments UK 2026/27 — Plans, Thresholds, Interest Rates and How to Pay Less

Your plan determines your repayment threshold, your interest rate and when the balance is written off. It's set by when and where you studied — not by anything you choose now. According to GOV.UK, you cannot pick your plan, and if you hold more than one loan you can be on several at once.

Plan 1 covers English and Welsh students who started before 1 September 2012, and all Northern Irish undergraduates. Plan 2 covers English undergraduates who started between 1 September 2012 and 31 July 2023, and Welsh undergraduates who started on or after 1 September 2012, plus Higher Education Short Course Loans. Plan 4 applies to Scottish students, whether undergraduate or postgraduate. Plan 5 covers English students who started on or after 1 August 2023 — the reformed system with lower tuition fee loans but a far longer repayment tail. Postgraduate Loans sit separately, covering Master's and Doctoral loans.

Check your plan in your Student Loans Company online account and confirm it matches your payslip. If your employer has you on the wrong plan, you can claim back any overpayment — but only if you spot it.

You repay a percentage of income above a threshold, not a percentage of your whole salary. The 2026/27 thresholds are:

• Plan 1: £26,900 a year (£2,241/month)
• Plan 2: £29,385 a year (£2,448/month)
• Plan 4: £33,795 a year (£2,816/month)
• Plan 5: £25,000 a year (£2,083/month)
• Postgraduate Loan: £21,000 a year (£1,750/month)

The rates are simple: 9% of income above the threshold on Plans 1, 2, 4 and 5, and 6% above the threshold on a Postgraduate Loan.

Thresholds apply per job, not to combined income. Two part-time jobs paying £20,000 each trigger no automatic deductions, because neither crosses any threshold. But Self Assessment reconciles everything at year end, so self-employed and multi-job earners can still owe. The yearly thresholds rise each April with inflation — but they move slowly, which is why more graduates drift into repayment each year.

Here's the annual repayment at four salary points, before tax. The spread between plans widens fast as income rises:

At £30,000 a Plan 4 borrower pays nothing while a Plan 5 borrower pays £450 a year — a £450 gap created purely by the threshold. At £60,000 the Plan 5 borrower pays £3,150 versus £2,358 on Plan 4.

Hold two loan types and the deductions stack. A Postgraduate Loan plus a Plan 2 loan means 6% over £21,000 and 9% over £29,385. Combined with income tax and National Insurance, a basic-rate Plan 2 graduate loses 37p of every extra pound above £29,385 — 20p income tax, 8p NI, 9p student loan. Add a Postgraduate Loan and it's 43p. That marginal rate is the number that should drive every salary and pension decision a graduate makes.

Interest is charged on the balance even when you're not earning, and it's where the plans diverge hardest. The current rates are:

• Plan 1: 3.2%
• Plan 4: 3.2%
• Plan 5: 3.2%
• Postgraduate Loan: 6.2%
• Plan 2: 3.2% up to £29,385; rising to 6.2% at £52,885, with a sliding scale in between

Plan 2 uses a Variable Interest Rate: RPI plus up to 3%, scaled by income. Earn £52,885 or more and you're charged the full 6.2%; earn less and the rate sits between 3.2% and 6.2%. While studying, it's RPI plus 3% — currently 6.2% — from the day the first payment reaches you or your university.

The most striking fact in the 2026/27 numbers is that Plan 1, 4 and 5 interest at 3.2% now sits below the Bank of England's 3.75% base rate. The cheapest student loans are now cheaper than a top savings account can pay — which matters enormously for the overpayment decision below. Meanwhile a Plan 2 or Postgraduate balance at 6.2% compounds faster than a 9% or 6% deduction, so high earners can watch their balance grow for years while still making payments.

UK student loans are cancelled after a fixed period whether or not you've cleared them. The write-off terms by plan:

• Plan 1: 25 years after the April you were first due to repay (loans from 1 September 2006 onwards); at 65 for older loans
• Plan 2: 30 years after the April you were first due to repay
• Plan 4: 30 years after the April you were first due to repay (loans from 1 August 2007); at 65 or 30 years, whichever comes first, for older loans
• Plan 5: 40 years after the April you were first due to repay
• Postgraduate Loan: 30 years after the April you were first due to repay (England and Wales)

This is the single most important feature of the system. A Plan 2 borrower with a typical £45,000 balance and a moderate salary will pay for 30 years and still have a chunk written off. Every extra voluntary pound they pay in year five simply reduces the amount the government later cancels — it never comes back to them. Plan 5's 40-year horizon flips the logic: more borrowers will genuinely clear the balance, so the write-off is far less forgiving. Full-time Welsh students may also qualify for £1,500 of Maintenance Loan to be written off.

The overpayment decision is arithmetic, not discipline. Stop treating a Plan 2 loan like commercial debt — it behaves like a 9% graduate tax with a cancellation date. Before you pay anything extra, answer one question: will you clear the balance before the write-off date?

Leave it alone if you're on Plan 2 with a large balance and a normal salary trajectory — most graduates will never clear it, and overpayments just shrink the amount the government was always going to cancel. The same logic applies to low-earning Plan 1/4/5 borrowers whose 3.2% interest is now below the base rate: your money beats 3.2% in a Cash ISA or even a top savings account.

Overpay if you're a high earner on Plan 2 or Postgraduate at 6.2% who is on track to clear the balance in full — every overpayment buys a guaranteed 6.2% return with no tax and no risk. The counter-argument: pension salary sacrifice returns more once tax relief and the student-loan saving are stacked in. Run the numbers on your own balance and salary before choosing.

Student loan administration is automated, which means errors are automatic too — and they always cost you.

Paying after the balance hits zero. The most common overpayment is continuing deductions after a loan is cleared. When the balance drops near zero, switch to a direct debit for the final months instead of relying on payroll. Refunds exist, but they take weeks.

Being on the wrong plan. A Plan 1 assignment where you should be Plan 2 changes your threshold by £2,485 a year. Check your plan in your SLC account, download your active plan type letter, and correct your employer. Overpayments caused by a wrong plan are refundable.

Ignoring salary sacrifice. A salary sacrifice pension contribution reduces gross pay, so it lowers your student loan repayment too. Sacrifice £200 a month on Plan 2 and you save £18 in loan repayment plus £40 income tax plus £16 National Insurance — the £200 gross costs £126 in take-home pay. That triple saving is the closest thing to free money in the graduate tax system.

Never checking the balance. Your SLC annual statement, showing interest applied and repayments received, lands in your online account by the end of August. Cross-check it against your payslips once a year.

This article is for information purposes only and does not constitute regulated financial advice. If you're unsure about your repayment strategy, speak to a qualified financial adviser.