Student loan Plan 5 explained: what students starting from 2023 need to know

Plan 2 (for students in England who started between 2012 and July 2023) has a repayment threshold of £29,385 in 2026/27. Plan 5 drops that to £25,000. That means you start repaying sooner, as soon as you earn over £25,000 before tax. The repayment rate stays at 9% of everything above the threshold. On a £30,000 salary, that's 9% of £5,000, or £450 a year (£37.50 a month). The maximum tuition fee in England has also risen, from £9,250 to £9,535 in 2025/26 and £9,790 in 2026/27, but the bigger change is the interest rate. Plan 5 charges RPI inflation only, which is 4.1% at the time of writing (2026/27), with no extra percentage on top. Plan 2 charges up to RPI + 3%, currently capped at 6%, so a Plan 2 balance can grow faster than inflation while you are studying and if you earn above £52,885.

Plan 2 loans are written off after 30 years. Plan 5 extends that to 40 years. This is the change that gets the most attention, and debate. On the positive side, the lower interest rate means your balance grows more slowly, so more of your payments go toward actually reducing the debt. On the negative side, you're potentially making repayments for a decade longer. For many graduates, especially those on average salaries, the 40-year term means they'll repay more in total than they would have under Plan 2, even though the interest rate is lower. Analysis of the reforms, including the government's own impact assessment, found that higher earners tend to repay less under Plan 5 because of the lower interest, while many lower and middle earners repay more because of the lower threshold and extra decade of payments.

Here is an illustrative example. You graduate with £45,000 of student debt (three years of tuition fees plus maintenance loans), start on £28,000 and get 3% pay rises each year. If the threshold stayed at £25,000, you would repay about £270 in your first year (9% of £3,000). By year 10, earning about £36,500, you would repay about £1,040 a year. In practice the threshold is due to rise with inflation from April 2027, which would lower these figures a little.

Whether you clear the balance before the 40-year write-off depends on your career, pay rises and inflation, so nobody can tell you your exact total in advance. As a broad rule, many middle earners on Plan 5 will repay for most or all of the 40 years, while under Plan 2 the same person might have had more written off after 30 years despite the higher interest rate. Try different salaries in our student loan calculator.

For most Plan 5 borrowers, voluntary overpayments don't make financial sense unless you're a high earner confident you'll repay the full balance anyway. If you're on track to have the remaining balance written off after 40 years, every voluntary payment is money you'd never have had to repay. It's like overpaying a debt that was going to be cancelled. The exception is if you earn significantly above average, say £50,000 or more within a few years of graduating, and your projections show you'll clear the full balance within the 40-year window. In that case, overpaying reduces the total interest you'll pay. Run the numbers with our student loan calculator or the repayment calculator on gov.uk before overpaying.

Student loan repayments come out of your salary automatically through PAYE, just like tax and National Insurance. They're not optional once you cross the threshold. On a £32,000 salary, your Plan 5 repayment is £52.50 a month. On £40,000, it's £112.50. On £50,000, it's £187.50. These amounts matter when you're budgeting for rent, bills, and savings. Treat your student loan repayment as a fixed deduction, like tax, and budget from your net pay after it's been taken. Our take-home pay calculator shows the real number to budget from, rather than your gross salary.

If you move outside the UK, you're still liable for repayments. The Student Loans Company sets fixed repayment amounts based on the cost of living in your destination country. You'll need to report your income annually and make payments directly. If you don't, the SLC can (and does) pursue the debt. Interest continues to accrue regardless of where you live. If you're planning to work abroad after graduating, factor this into your plans, the repayment amounts for some countries can be higher than what you'd pay on the same salary in the UK.