Calculate your monthly repayments, total amount repaid, estimated write-off and whether you'll clear your loan before the 30-year deadline.
Understanding UK Student Loan Plans
Plan 2 Plan 2
Plan 2 applies to English or Welsh students who started an undergraduate course between 1 September 2012 and 31 August 2023. Key rules:
- Repayment threshold: 9% of income above £27,295/year (2024/25, rises with average earnings)
- Write-off: 30 years after the April following graduation
- Interest (while studying): RPI + 3%
- Interest (after graduation): RPI to RPI+3% based on income
- Who repays in full: High earners consistently above ~£50,000+ from graduation
Key fact: The Institute for Fiscal Studies estimates that approximately 70% of Plan 2 graduates will never fully repay their loan. The average graduate will repay around £30,000 of a typical £50,000+ loan before write-off.
Plan 5 Plan 5
Plan 5 applies to English students starting undergraduate courses from September 2023. Important changes from Plan 2:
- Lower threshold: £25,000/year (vs £27,295 for Plan 2)
- Longer write-off: 40 years after graduation (vs 30 years)
- Interest: RPI only (no RPI+3% loading - a positive change)
- Effect: More graduates will repay more total, for longer, due to lower threshold and extended term
Plan 3 - Postgraduate Loan
Plan 3 covers postgraduate master's loans (max ~£12,167/year). Rules: repay 6% of income above £21,000/year, interest at RPI+3% throughout, written off after 30 years. If you have both Plan 2 and Plan 3, both are repaid simultaneously from the same salary threshold calculation.
Should You Overpay Your Student Loan?
Short answer: Usually no, for average earners. If you're on Plan 2 and earning the average UK graduate salary (~£35,000), you're unlikely to repay your full balance in 30 years. Any voluntary overpayments on amounts that would have been written off are effectively wasted money. The exception: if you'll earn well over £50,000+ consistently throughout your career, modelling shows you may repay in full, in which case overpaying saves interest.
A better use of spare cash for most graduates: build an emergency fund, contribute extra to a pension (with employer matching), pay off higher-rate consumer debt, or save for a house deposit - all of these typically provide better financial returns than overpaying a student loan that will likely be written off.
Student Loan vs Mortgage: How Lenders View It
Student loan repayments do affect mortgage affordability assessments because they reduce your net monthly income. However, the loan itself does NOT appear on your credit file and does NOT affect your credit score. When applying for a mortgage, lenders include the monthly student loan repayment in their affordability calculations. This can reduce your borrowing power by approximately 5-10% depending on your income and repayment amount.
International Context
UK student loans are considered by most economists to be a hybrid graduate contribution system rather than a traditional debt. The income-contingent repayment model means you never repay more than you can afford, there is no default risk, and the write-off provision ensures the debt disappears after a fixed period. This is fundamentally different from US student loans, which do not have equivalent write-off provisions and can follow graduates throughout their lives.
Frequently Asked Questions
What is the Plan 2 student loan repayment threshold?
For Plan 2, you repay 9% of your income above £27,295 per year (2024/25 threshold, which rises annually with average earnings). If you earn £30,000, you repay 9% of £2,705 = £243 per year (approximately £20/month). You make no repayments if your income is at or below the threshold. Repayments are deducted automatically by your employer through PAYE, or via Self Assessment if self-employed.
When is a Plan 2 student loan written off?
Plan 2 student loans are written off 30 years after the April following your first repayment due date (essentially 30 years after graduation in most cases). Any remaining balance at that point is cancelled with no tax implications. The write-off is automatic - you don't need to apply. Research from the Institute for Fiscal Studies suggests around 70% of Plan 2 graduates will have loans written off with significant balances remaining.
What is the Plan 5 student loan?
Plan 5 applies to English students starting undergraduate courses from September 2023. Key differences from Plan 2: lower repayment threshold of £25,000 (vs £27,295), written off after 40 years (vs 30 years), and interest rate is RPI only while earning (no RPI+3% loading after graduation). Monthly repayments are higher due to the lower threshold, and the longer term means more graduates will repay for longer.
Should I overpay my student loan?
For most Plan 2 graduates earning average UK salaries, overpaying is NOT recommended. Around 70% of Plan 2 graduates will not repay the full balance before the 30-year write-off. Any overpayments on balances that would have been written off are essentially wasted. Only consider overpaying if you are confident you will earn high salaries (£55,000+) consistently and will repay in full before write-off. For most graduates, there are better uses for spare cash.
What interest rate is charged on Plan 2 loans?
While studying and for the year following graduation: RPI + 3%. After graduation, the interest scales based on income: at or below the threshold (£27,295) - RPI only. At £49,130 or above - RPI + 3%. Between threshold and £49,130 - RPI scaling up to RPI+3%. The current (2024/25) interest rate is capped and varies with RPI, which has ranged from 1.5% to 7.3% in recent years.
Is a student loan like a real debt?
No. A UK student loan is fundamentally different from conventional debt. It does not appear on your credit file, does not affect your credit score, cannot be chased by debt collectors, is written off after 30-40 years, and repayments are purely income-contingent (never repay more than 9% above the threshold regardless of balance). Think of it as a graduate contribution system or additional income tax, not a traditional debt that must be repaid in full.
What is a Postgraduate Loan (Plan 3)?
Plan 3 covers postgraduate master's loans (maximum £12,167/year as of 2024/25). Repayment: 6% of income above £21,000/year. Interest: RPI+3% throughout. Written off: 30 years after graduation. If you have both a Plan 2 and Plan 3 loan, both deductions are calculated separately and taken simultaneously from your salary. They don't combine to create a higher percentage deduction.