The payslip line nobody explains before your first proper job#
You get the job offer, negotiate a start date, buy a coffee to celebrate. Then the first payslip arrives with a deduction labelled "Student Loan" sitting next to tax and National Insurance, a bite nobody mentioned in any careers talk.
Almost every graduate hits this moment with the same questions. Which plan am I even on? Why did my flatmate, who studied the same subject at a different university, get a different number taken?
The answers sit inside a repayment system with five separate versions running at once, plus a postgraduate variant, each with its own threshold, interest rate and repayment rate. None of it gets explained clearly at enrolment, when nobody is thinking about repayment, and by the time it matters the letter that mentioned it is long forgotten.
What a "repayment plan" actually is, and why the UK has five of them#
A repayment plan is the rulebook attached to your loan: the salary you need before anything is deducted, the percentage taken above that point, the interest charged on the balance, and the date any remaining debt is wiped clean regardless of what's left.
This is where a student loan diverges from a bank loan or car finance. There's no fixed monthly repayment and no penalty for paying nothing while you earn under the threshold. If you never cross it, or never clear the balance, the remainder is written off after a set number of years. It behaves like a graduate tax with an expiry date, not conventional debt.
The UK has several plans because student finance policy is devolved and repeatedly reformed. England, Wales, Scotland and Northern Ireland each set their own rules, and England alone has changed its system twice: once when fees rose to £9,000 in 2012, and again for students starting from August 2023. Each change created a new cohort with its own terms instead of moving everyone onto the latest version, which is why five plans now run side by side.
Plan 1, 2, 4 or 5: working out which one is actually yours#
Your plan is fixed by where you applied for student finance and when your course started, not by where you currently work or live.
If you're an undergraduate from England or Wales who started before 1 September 2012, you're on Plan 1, and so is anyone from Northern Ireland, since Northern Ireland uses Plan 1 for all its borrowers regardless of start date. English students who started between September 2012 and July 2023 are on Plan 2. Scottish students borrowing through the Student Awards Agency for Scotland are on Plan 4, whatever year they started.
Plan 5 is the newest, and the narrowest. It applies only to English students who began a course on or after 1 September 2023. Wales chose not to follow: the Welsh Government confirmed it would keep Plan 2 for new Welsh-domiciled students rather than adopt Plan 5's less generous terms, a genuinely different policy call between two nations educating students under the same broad system.
Postgraduate loans sit outside all this as Plan 3, repaid separately and on top of any undergraduate loan.
The threshold number that decides whether anything comes off your pay#
Every plan works the same way once the threshold is set: you repay 9% of whatever you earn above it, or 6% for the postgraduate loan, and nothing at all below it.
For the 2025/26 tax year, the annual thresholds are roughly £24,990 for Plan 1, £28,470 for Plan 2, £31,395 for Plan 4, £25,000 for Plan 5 and £21,000 for the postgraduate loan, according to current GOV.UK and Student Loans Company guidance. These are reviewed every April, so treat them as a snapshot and check the official repayment pages for whatever tax year you're actually in.
That caveat matters more than it sounds. The Plan 2 threshold was frozen at £27,295 from 2021/22 through 2024/25, a deliberate policy choice, before rising to £28,470 in April 2025. The Institute for Fiscal Studies has argued that freezing a threshold while wages rise with inflation quietly increases what middle-earning graduates repay in real terms, since more of their income falls above the line each year even though the line hasn't moved. Plan 5's £25,000 threshold is frozen by design until April 2027, then rises in line with the Retail Prices Index.
If you're paid through PAYE, none of this needs action from you. Your employer applies the relevant weekly or monthly slice of the annual threshold automatically, based on the plan HMRC has on file.
Why your interest rate might not match your coursemate's#
Interest accrues from the day the loan is paid out, and the rate depends on your plan, not your credit history or how much you borrowed.
Plan 1 and Plan 4 use the same formula: whichever is lower, the Retail Prices Index or the Bank of England base rate plus one percentage point, which keeps both relatively cheap to hold. Plan 2 is pricier for most borrowers, charging RPI plus up to 3% on a sliding scale tied to income, so higher earners pay more interest on the same debt, up to a cap of 6% from September 2026. Plan 5 drops that income-linked surcharge and charges RPI only. The Institute for Fiscal Studies calls this the plan's one clear upside: because interest never runs ahead of inflation, Plan 5 borrowers won't repay more than they borrowed in real terms, something that has happened to plenty of Plan 2 borrowers.
Postgraduate loans, technically Plan 3, are the outlier. The rate is fixed at RPI plus 3% no matter what you earn, so someone on £23,000 pays the same rate as someone on £90,000, only the amount above the threshold differs.
Rates reset each September using the March RPI figure, so this year's number isn't guaranteed next year.
The April rule: when repayment actually switches on#
Repayment doesn't start the day you get a job, or the day you sit your last exam. It starts the April after you leave your course, whichever comes first between graduating, dropping out or otherwise ceasing to be a student, and only then if you're earning above your threshold.
Finish your degree in June, and your first possible repayment month is the following April, roughly nine months later, a stretch where nothing is due even if you're earning well. Finish in December and the wait is shorter. Take a job paying under the threshold straight after graduating, whether that's a low-paid graduate scheme or part-time work while you job-hunt, and you simply don't repay until your income clears it, with no penalty for the gap.
Interest doesn't pause, though. It keeps accruing on the full balance from day one, which is why the total owed can look higher a year after graduation than it did the day you left.
Freelancing, self-employed or working abroad? The rules change#
The rules above assume a straightforward PAYE job, and plenty of graduates don't have one.
If you're self-employed, nothing is taken automatically. You declare your loan plan on your Self Assessment tax return and pay what's owed as a lump sum alongside your income tax bill by 31 January, per guidance from the Low Incomes Tax Reform Group. That means budgeting for it yourself across the year instead of watching it disappear in small increments, and it's an easy sum to underestimate once PAYE stops doing the arithmetic for you.
Moving abroad doesn't cancel the debt or let you dodge the Student Loans Company. Plan to live overseas for more than three months and you're required to tell the SLC and show how you're supporting yourself. Repayments then continue by direct debit, calculated against a separate overseas earnings threshold that GOV.UK publishes per country, adjusted for local costs rather than simply applying the UK figure. Skip the notification and you risk being marked in default, with the debt potentially passed to a collection agency even if you fully intend to keep paying.
Questions students actually type into Google#
Do I have to pay anything before I start earning above the threshold?#
No. Nothing is collected while your income sits below your plan's threshold, and there's no minimum payment or standing charge for holding the loan. Interest still builds on the balance in the background regardless.
I studied in one UK nation but work in another. Does that change my plan?#
No. Your plan is locked in by where you applied for funding and when your course started, not by where you currently live or work. A Scottish-domiciled graduate on Plan 4 working in London still repays under Plan 4's threshold and interest rules.
Does a student loan show up on my credit report?#
It doesn't appear on standard UK credit reference files and isn't held against you in a credit check. Mortgage lenders do ask about it on applications and factor the deduction into affordability sums, so it still shapes how much you can borrow.
What happens if I never earn enough to clear the balance?#
It's written off, not carried forward or chased from your estate. Plan 1 is written off 25 years after the April you first became liable to repay; Plan 2 and Plan 4 after 30 years; Plan 5 after 40 years. Few graduates are projected to clear a Plan 5 loan within four decades, so write-off, not full repayment, is the realistic outcome for many, particularly on lower salaries.
Is it ever worth paying off a student loan early?#
It depends on your plan and what else the money would do. On Plan 1 or Plan 4, paying relatively low interest and likely to hit the write-off date anyway, overpaying often gains little. On Plan 2 or Plan 5, high lifetime earnings can make overpaying worthwhile, once other debts and an emergency fund are covered. MoneySavingExpert's long-standing advice is to run the numbers for your own plan rather than follow a blanket rule.
Do postgraduate loans work the same way as undergraduate ones?#
Broadly yes, with a lower threshold, a 6% repayment rate instead of 9%, and a fixed interest rate that doesn't rise with income. Repaying both an undergraduate and a postgraduate plan means both are deducted at once, so the combined bite can reach 15% of income above the higher threshold.
Can I check which plan I'm actually on if I'm not sure?#
Yes. Your student finance body (Student Finance England, Wales, SAAS or Student Finance NI) confirms your plan type when the loan is set up, and it's listed in your online student finance account. When in doubt, that account beats a guess based on when your friends graduated.
