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Plan 5's 40-year write-off means most graduates will repay for their entire working life — it functions as a graduate income tax
Plan 5 (English students from September 2023) extends the write-off period from 30 to 40 years. With an average student debt of approximately £45.000 at graduation and Plan 5 interest at RPI only, high-earning graduates will repay the full balance. But the majority of graduates — projected at approximately 52% — will still not fully repay and will have residual debt written off at year 40. For the median earner, Plan 5 is functionally a 9% graduate income surcharge on earnings above £25.000 for approximately 35-40 years. The IFS estimates the Plan 5 changes raise the expected lifetime repayment for typical graduates by approximately £8.000-£15.000 compared to Plan 2.
Source: IFS Student Loan Reforms Analysis 2025 + SLC Plan 5 modelling
Plan 2 borrowers are relatively better off — lower repayment threshold (£28.470) and 30-year write-off creates incentive to finish paying quickly for high earners
Existing Plan 2 borrowers (English students 2012-2023) repay 9% above £28.470/year with interest at RPI+0-3% and a 30-year write-off. High earners on Plan 2 can fully repay their loans — the RPI+3% interest rate (approximately 7-8% in 2023-2024) caused significant debt growth, but above the write-off threshold the 9% acts efficiently. Lower earners with Plan 2 benefit from the 30-year write-off. Plan 2 is now generally considered more favourable than Plan 5 for most income profiles.
Source: SLC Plan 2 repayment modelling 2026
Scottish students get the best deal — no tuition fees for Scottish universities
Scottish domiciled students studying at Scottish universities pay no tuition fees — funded by the Scottish Government (SAAS). The Scottish student loan (Plan 4 from 2023) carries the same 9% repayment rate but on a £31.395 threshold (2026) — the highest in the UK. The debt is correspondingly much lower (living costs only, approximately £5.000-8.000 total versus £45.000+ for English students). Welsh students benefit from grants covering living costs plus low tuition loans. Northern Ireland has £4.750/year tuition with Plan 1 repayment conditions.
Source: SAAS Scotland + HMRC Plan 4 2026
Monthly Student Loan Repayment — Plan 2 vs Plan 5 by Salary 2026
SLC
UK vs European Student Loan Interest Rates 2026
SLC + national student loan authorities
📋 Reference Data
UK Student Loan Plans — Key Parameters 2026/27
SLC + HMRC — all figures for England unless stated
| Parameter | Plan 1 | Plan 2 | Plan 5 (from Sept 2023) | Postgrad Loan | Plan 4 (Scotland) |
|---|---|---|---|---|---|
| Who has this | Pre-2012 English/Welsh; current NI | English/Welsh 2012-2023 | English from Sept 2023 | Masters/PhD | Scottish domiciled at Scottish unis |
| Tuition fee max | £3.465 | £9.535 | £9.535/yr (rising with inflation) | N/A | £0 (SAAS funded) |
| Repayment threshold | £24.990 | £28.470 | £25.000 | £21.000 | £31.395 |
| Repayment rate | 9% | 9% | 9% | 6% | 9% |
| Interest (in study) | RPI | RPI+3% | RPI | RPI+3% | RPI |
| Interest (repaying, low income) | RPI | RPI | RPI | RPI | RPI |
| Interest (repaying, high income) | RPI | RPI+3% (>£52.420) | RPI | RPI+3% | RPI |
| Write-off | 25 yrs post-study | 30 yrs post-April-graduation | 40 yrs post-April-graduation | 30 yrs | 30 yrs |
| Avg debt at graduation | ~£10.000 | ~£45.000 | ~£45.000 | ~£12.000 | ~£7.000 |
ⓘ Plan 5 threshold (£25.000) is frozen until at least 2027, while Plan 2 threshold rises with average earnings. The lower Plan 5 threshold means graduates start repaying at a lower income — approximately £43/month extra at £30.000 salary compared to Plan 2. Plan 5's RPI-only interest is more favourable than Plan 2's RPI+3% — a trade-off by the government.
Monthly Student Loan Repayment — by Salary and Plan 2026
SLC — 9% on earnings above threshold
| Annual Salary | Plan 1 (£24.990 threshold) | Plan 2 (£28.470 threshold) | Plan 5 (£25.000 threshold) | Postgrad (£21.000, 6%) |
|---|---|---|---|---|
| £20.000 | — | — | — | — |
| £25.000 | — | — | ~£0 | £30/mo |
| £28.000 | £23/mo | — | £22/mo | £53/mo |
| £30.000 | £38/mo | £11/mo | £38/mo | £68/mo |
| £35.000 | £76/mo | £49/mo | £75/mo | £105/mo |
| £40.000 | £114/mo | £86/mo | £113/mo | £143/mo |
| £50.000 | £189/mo | £161/mo | £188/mo | £218/mo |
| £60.000 | £264/mo | £236/mo | £263/mo | £293/mo |
| £80.000 | £414/mo | £386/mo | £413/mo | £443/mo |
ⓘ Deductions are approximate — calculated as (Salary − Threshold) / 12 × 9% (or 6% for Postgrad). If holding both Plan 2 and Postgraduate Loan, repayments are calculated and deducted separately — combined deduction at £40.000 = Plan 2 £86 + Postgrad £143 = £229/month. Repayments are via PAYE — no voluntary extra payments for most unless specifically making overpayments.
Lifetime Repayment Modelling — Plan 2 vs Plan 5 (£45.000 debt at graduation)
IFS + SLC modelling — indicative only
| Income Trajectory | Plan 2 Total Repaid | Plan 5 Total Repaid | Plan 2 Written Off | Plan 5 Written Off | Better Plan |
|---|---|---|---|---|---|
| Low earner (avg £28.000) | ~£12.000 | ~£28.000 | ~£50.000 written off | ~£35.000 written off | Plan 2 |
| Median earner (avg £38.000) | ~£38.000 | ~£55.000 | ~£22.000 written off | ~£18.000 written off | Plan 2 |
| High earner (avg £55.000) | ~£55.000 (full) | ~£58.000 (full) | £0 written off | £0 written off | Similar |
| Very high earner (avg £80.000+) | ~£55.000 (full + interest) | ~£52.000 (RPI only) | £0 | £0 | Plan 5 |
ⓘ Plan 5's RPI-only interest makes it better for very high earners who will repay in full — less interest accumulates. For median and low earners, Plan 2's shorter 30-year write-off is superior. The 'correct' choice is irrelevant for most graduates — the plan is determined by graduation year, not choice. These figures are illustrative and highly sensitive to salary growth, inflation (RPI), and policy changes.
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🔬 Methodology & Sources
UK Student Loan Calculation
UK student loans are income-contingent — repayments are 9% (Plan 1/2/4/5) or 6% (Postgraduate) of earnings above the repayment threshold. Deducted via PAYE by employer. Interest accrues from day one of study. Plan 2 interest = RPI while studying or earning below threshold; RPI+3% when earning above £52.420 (2026); taper between thresholds. Plan 5 interest = RPI only throughout. Write-off is 30 years (Plan 2) or 40 years (Plan 5) from the April following graduation.
Formula
Monthly_repayment = max(0, (Annual_salary − Threshold) / 12 × 0.09) | Annual_interest = Outstanding_balance × applicable_RPI_rate
CitationEducation (Student Loans) Act 1998; Higher Education and Research Act 2017; SLC 2026/27 repayment guidance.
❓ Frequently Asked Questions
Interest rates depend on the loan plan. Plan 2 (English/Welsh students 2012-2023): RPI while studying or earning below £28.470; RPI+3% if earning above £52.420; tapering between. RPI for 2026/27 is approximately 3-4%. Plan 5 (English students from September 2023): RPI only throughout — no additional interest above inflation. Plan 1: RPI or Bank of England base rate +1%, whichever is lower. Postgraduate Loan: RPI+3%.
Plan 2 (2012-2023 English/Welsh graduates): £28.470/year (£2.373/month). Plan 5 (from September 2023): £25.000/year (£2.083/month) — frozen until at least 2027. Plan 1 (pre-2012, Northern Ireland): £24.990/year. Plan 4 (Scotland): £31.395/year — highest threshold in the UK. Postgraduate Loan: £21.000/year. Repayment is 9% of earnings above threshold (6% for Postgraduate) — deducted via PAYE.
Plan 1: 25 years after the April following graduation, or at age 65, whichever comes first. Plan 2: 30 years after the April following the course end date. Plan 5: 40 years after the April following graduation — a significant extension that means most Plan 5 borrowers will be repaying until their mid-60s. Plan 4 (Scotland): 30 years. Postgraduate Loan: 30 years. Write-off is automatic — no action required.
For most borrowers, no. The key calculation: will you repay the full balance before write-off? If the answer is no (which is true for approximately 50-75% of graduates depending on the plan), voluntary overpayments simply reduce the amount written off — you pay more than you would have. Only high-earning graduates who will definitely repay in full before write-off benefit from voluntary overpayments (as it reduces interest accumulation). Check the SLC's repayment projection tool to model your specific situation.
UK student loans are among the most expensive in Europe. Netherlands: student loans at 0% interest; €1.119 maximum grant/month (2023 system); no tuition for EU students. Germany: no tuition fees for domestic students; BAföG grants/loans at 0% interest; maximum approximately €934/month. Sweden: 0,13% interest; strong grant component. UK's Plan 2 at RPI+3% was one of Europe's highest student loan interest rates. Plan 5's RPI-only is more aligned with European norms, but the £45.000 debt level and 40-year write-off remain internationally high.
Sources & References
Data sourced from official institutional publications. Results are for informational purposes only. Last reviewed Apr 2026.
Data Disclaimer
UK student loan rates from Student Loans Company (SLC) and HMRC 2026/27. Plan 5 applies to new English students from September 2023. Scottish, Welsh, and NI students have different arrangements. Interest rates updated annually each September using RPI.
UK student loan rates from Student Loans Company (SLC) and HMRC 2026/27. Plan 5 applies to new English students from September 2023. Scottish, Welsh, and NI students have different arrangements. Interest rates updated annually each September using RPI.