There are five UK student loan repayment plans: Plan 1, Plan 2, Plan 4, Plan 5 and the Postgraduate Loan. Which one applies depends on where you applied for funding and when your course started. For 2026/27 the annual repayment thresholds are £26,900 (Plan 1), £29,385 (Plan 2), £33,795 (Plan 4), £25,000 (Plan 5) and £21,000 (Postgraduate Loan). You repay 9% of income above the threshold on Plans 1, 2, 4 and 5, and 6% on a Postgraduate Loan. The amount you owe has no effect on how much you repay each year.
Which student loan plan are you on?
You cannot choose your plan. It is fixed by the student finance body you applied to and the date your course started:
| Applied to | Course start | Plan |
|---|---|---|
| Student Finance England | Before 1 September 2012 | Plan 1 |
| Student Finance England | 1 September 2012 to 31 July 2023 | Plan 2 |
| Student Finance England | On or after 1 August 2023 | Plan 5 (undergraduate and PGCE) |
| Student Finance Wales | Before / on or after 1 September 2012 | Plan 1 / Plan 2 |
| Student Awards Agency Scotland | Any | Plan 4 |
| Student Finance Northern Ireland | Any | Plan 1 |
Master's and doctoral loans from England or Wales sit on the separate Postgraduate Loan plan. Postgraduate students from Scotland are on Plan 4, and those from Northern Ireland on Plan 1. Many graduates hold more than one plan, for example Plan 2 for a first degree and a Postgraduate Loan for a master's. The Student Loans Company's online account shows an "active plan type letter" that confirms the plan.
2026/27 repayment thresholds and rates
Thresholds change on 6 April each year. Payroll uses exact weekly and monthly figures:
| Plan | Annual | Monthly | Weekly | Rate |
|---|---|---|---|---|
| Plan 1 | £26,900 | £2,241.66 | £517.30 | 9% |
| Plan 2 | £29,385 | £2,448.75 | £565.09 | 9% |
| Plan 4 | £33,795 | £2,816.25 | £649.90 | 9% |
| Plan 5 | £25,000 | £2,083.33 | £480.76 | 9% |
| Postgraduate Loan | £21,000 | £1,750 | £403.84 | 6% |
The 9% and 6% rates are set by regulation 44 of the Education (Student Loans) (Repayment) Regulations 2009, which calls the Postgraduate Loan a "plan 3 loan". The government has announced that the Plan 1 threshold will rise to £28,005 from 6 April 2027.
How repayments work in practice
For employees, repayments come out through PAYE alongside tax and National Insurance. The calculation is made each pay period on its own, not cumulatively. Four practical consequences follow:
- Bonuses trigger deductions. A bonus month can push pay over the monthly threshold even if annual income ends up below it. The borrower can claim a refund from the Student Loans Company after the tax year ends;
- Two jobs are tested separately. Each employer applies the threshold to its own pay, so two part-time jobs below the threshold each produce no deduction;
- Self Assessment uses total income. If you file a tax return, HMRC works out the liability on your income for the whole year, including self-employed profit, and credits what was already deducted through payroll;
- More than one undergraduate plan. You pay 9% above the lowest of your thresholds, in one deduction, which the Student Loans Company splits between the loans.
A Postgraduate Loan is different. It runs alongside an undergraduate plan, so a borrower with both pays 6% above £21,000 and 9% above their undergraduate threshold at the same time.
Worked examples
Plan 2, £36,000 salary paid monthly. Monthly pay is £3,000. £3,000 − £2,448.75 = £551.25, and 9% of that is £49.61, so £49 is deducted (the employee examples on gov.uk round down to whole pounds). Over a full year the liability is about 9% × (£36,000 − £29,385) = £595.
Plan 2 plus Postgraduate Loan, £42,000 salary. Monthly pay is £3,500. The Postgraduate Loan deduction is 6% × (£3,500 − £1,750) = £105. The Plan 2 deduction is 9% × (£3,500 − £2,448.75) = £94.61, so £94. The total is £199 a month, which is a material cut in take-home pay that many graduates do not expect when they take a master's.
Plan 5, £30,000 salary. The annual liability is 9% × (£30,000 − £25,000) = £450.
Interest and write-off
Interest is charged from the first payment, whether or not you are earning above the threshold. For 1 September 2026 to 31 August 2027, the applicable RPI is 4.1%:
- Plan 1. The lower of RPI and Bank Rate plus 1%, so 4.1%;
- Plan 2. While studying, RPI plus 3% (7.1%), capped at 6% for this period. After leaving the course, RPI (4.1%) for annual income of £29,385 or less, rising on a sliding scale to the 6% cap at £52,885 or more;
- Plan 4 and Plan 5. 4.1%;
- Postgraduate Loan. RPI plus 3% (7.1%), capped at 6% for this period.
Unpaid balances are written off after a fixed period that runs from the April you were first due to repay. The period is 25 years for Plan 1 (or age 65 if the first loan was paid before 1 September 2006), 30 years for Plan 2 and the Postgraduate Loan, 30 years for Plan 4 (or age 65 if earlier, where the first loan was paid before 1 August 2007), and 40 years for Plan 5. Many Plan 2 and Plan 5 borrowers will never clear the balance, which is why voluntary overpayments, which cannot be refunded, are not always good value.
What employers must do
Employers start deductions from the next available payday when any of the following arrives: a P45 showing that deductions continue, a starter checklist declaring a loan, or an SL1 (student loan) or PGL1 (postgraduate loan) start notice from HMRC. If a new employee does not know their plan, HMRC's guidance says to use Plan 5 until an SL1 arrives. Deductions stop only on an SL2 or PGL2 stop notice, or when the employee leaves.
Deductions are worked out on the same gross pay used for employer Class 1 National Insurance. They are reported on the FPS and the P60 in whole pounds. Records, including start and stop notices, must be kept for at least 3 years after the end of the tax year they relate to. A wrong plan type is a common payroll error. An employee wrongly put on Plan 1 instead of Plan 2 pays on £2,485 a year of income that should be free, and has to reclaim it from the Student Loans Company.
Sources: Repaying your student loan, HMRC student loan guidance for employers, rates and thresholds for employers 2026 to 2027, the 2026 interest rate announcement and regulation 44 of the 2009 Regulations. See also our guides to the postgraduate loan, the starter checklist and the P60.
Acumon sets up and checks student loan plan codes as part of payroll management, and works out Self Assessment student loan liabilities within income tax returns.