Student Loan Repayments and Your Salary — Plan 1, 2, 4 and 5 Explained

UK student loan repayments are collected through the PAYE payroll system — just like income tax and National Insurance. If you have a student loan, this means a percentage of your earnings above a certain threshold is automatically deducted every pay period before you receive your pay. Understanding how this works, and which repayment plan you are on, can make a significant difference to your monthly take-home pay.

Which repayment plan are you on?

Plan 1: Applies to students who started university before 1 September 2012 in England/Wales, or any time in Northern Ireland, plus Scottish students who started after 1 September 1998. Repayment threshold: £24,990/year (2025/26). Repayment rate: 9% of earnings above threshold. Write-off: 25 years after first repayment was due (or at age 65, whichever comes first).

Plan 2: Applies to students who started university on or after 1 September 2012 in England or Wales. This is the most common plan for current graduates. Repayment threshold: £27,295/year (2025/26). Repayment rate: 9% above threshold. Write-off: 30 years after the April following graduation.

Plan 4 (Scotland): For Scottish students who started university from 1998 onwards and took out loans from the Student Awards Agency for Scotland (SAAS). Repayment threshold: £31,395/year (2025/26). Repayment rate: 9% above threshold. Write-off: at age 65 or 30 years from first due date.

Plan 5: For students starting university from August 2023 onwards in England. This plan has significant changes: lower repayment threshold (£25,000/year) and extended write-off period of 40 years. This plan is designed to ensure more graduates repay more of their loan before write-off.

Postgraduate Loan (PGL): For master's and doctoral degree loans from August 2016 (master's) or August 2018 (doctoral). Repayment threshold: £21,000/year. Rate: 6% above threshold. PGL repayments are in addition to any undergraduate plan repayments.

How much do student loans reduce your take-home?

On a £25,000 salary (Plan 2, threshold £27,295):
Below threshold — no repayments. Take-home unaffected.

On a £30,000 salary (Plan 2):
Repayable income: £30,000 − £27,295 = £2,705
Annual repayment: 9% × £2,705 = £243/year (£20/month)
Take-home impact: small — £20/month less.

On a £35,000 salary (Plan 2):
Repayable: £7,705 | Annual: £693/year | Monthly: £58
Take-home: approximately £28,027/year vs £28,720 without loan.

On a £40,000 salary (Plan 2):
Repayable: £12,705 | Annual: £1,143/year | Monthly: £95
Take-home: approximately £31,177/year vs £32,320 without loan.

On a £50,000 salary (Plan 2):
Repayable: £22,705 | Annual: £2,043/year | Monthly: £170
Take-home: approximately £37,477/year vs £39,520 without loan.

On a £60,000 salary (Plan 2):
Repayable: £32,705 | Annual: £2,943/year | Monthly: £245
Take-home: approximately £42,377/year vs £45,320 without loan.

Plan 1 vs Plan 2 vs Plan 4 comparison on £40,000 salary

Plan 1 (threshold £24,990): Repayable: £15,010. Annual: £1,351/year (£113/month).
Plan 2 (threshold £27,295): Repayable: £12,705. Annual: £1,143/year (£95/month).
Plan 4 (threshold £31,395): Repayable: £8,605. Annual: £775/year (£65/month).
Plan 5 (threshold £25,000): Repayable: £15,000. Annual: £1,350/year (£113/month).

Scottish graduates on Plan 4 get the most generous threshold — nearly £4,400 above Plan 2. This reflects Scotland's historically lower tuition fees (capped at ~£1,820/year vs £9,250/year in England).

Will you ever fully repay your student loan?

This is the most important question for Plan 2 graduates. Because loans grow with interest (RPI + up to 3% depending on income) and repayments are income-contingent, many graduates on Plan 2 will never fully repay their loan before it is written off after 30 years.

Modelling by the Institute for Fiscal Studies suggests that for graduates earning typical graduate salaries, the total amount repaid over 30 years under Plan 2 is fairly similar regardless of initial loan size — meaning additional borrowing (for living costs, postgraduate study etc.) often makes very little practical difference to total repayments for average earners. For high earners, the calculation is different — those earning £55,000+ from a young age are likely to repay in full before write-off.

Should you make voluntary overpayments?

The financial case for voluntary overpayments is weak for most Plan 2 graduates, because the loan will be written off anyway after 30 years. Paying extra reduces the balance, which only matters if you would have repaid in full before write-off. For high earners who expect to repay in full, overpayments avoid accumulating interest. For average earners, the money is better invested elsewhere. Check your projected balance vs repayments using the official student loan repayment calculator at studentloans.co.uk.

Calculate your take-home pay with student loans

Use our UK salary calculator and enable the student loan option to see your exact monthly take-home after income tax, NI, and student loan repayments on your plan.