You've graduated, landed a job, and now there's a line on your payslip that says "student loan" with money disappearing every month. Nobody really explained how this works at university, so here's the version you actually needed.
Student loan repayments in the UK aren't like paying off a credit card or a mortgage. The system is closer to a graduate tax — it comes straight out of your wages, only kicks in when you earn enough, and eventually gets written off whether you've cleared the balance or not.
Which plan you're on depends on when and where you started your course. You don't get to pick.
| Plan | Who | Threshold | Rate | Written Off |
|---|---|---|---|---|
| Plan 1 | England/Wales before 2012, or NI/Scotland | £22,015 | 9% | 25 years |
| Plan 2 | England/Wales from 2012 | £27,295 | 9% | 30 years* |
| Plan 4 | Scotland from 1998 | £27,660 | 9% | 30 years |
| Plan 5 | England from 2023/24 | £25,000 | 9% | 40 years |
| Postgrad | Postgraduate master's/doctoral loan | £21,000 | 6% | 30 years |
*Plan 2 borrowers who started in 2023 or later have a 40-year write-off period instead of 30.
If you started university in England or Wales before September 2012, or you studied in Northern Ireland or Scotland under the old system, you're on Plan 1. The repayment threshold is £22,015 per year. You repay 9% of everything you earn above that. The remaining balance gets written off 25 years after you became eligible to repay.
Plan 1 has the lowest threshold, which means repayments start earlier — but the balance is typically smaller than Plan 2 loans, and the 25-year write-off is shorter.
This is the one most recent English and Welsh graduates are on. The threshold is higher at £27,295, so you keep more of your pay before repayments begin. You still repay at 9% of earnings above the threshold. The loan gets written off after 30 years — unless you started your course in 2023 or later, in which case it's 40 years.
Plan 2 loans tend to be much bigger (tuition fees jumped to £9,250/year), and the interest can be eye-watering. But here's the thing most people miss: the balance almost doesn't matter. What matters is how much you earn and for how long. More on that below.
If you took out a student loan in Scotland from 1998 onwards, you're on Plan 4. The threshold is £27,660, you repay at 9%, and the loan is written off after 30 years. Scottish students generally have smaller loan balances because tuition fees are lower (or covered entirely for eligible Scottish students studying in Scotland).
Plan 5 applies to students who started courses in England from the 2023/24 academic year onwards. The threshold is lower than Plan 2 at £25,000, which means repayments start sooner. The trade-off is that interest is now capped at RPI only (no extra percentage on top), but the write-off period stretches to 40 years. That's a long time to be making repayments.
If you took out a postgraduate master's or doctoral loan, that sits alongside your undergraduate plan. The threshold is £21,000, and you repay 6% of earnings above it. This is separate from your undergrad repayment — so yes, if you have both a Plan 2 loan and a postgraduate loan, both come out of your pay at the same time. 9% plus 6% above the respective thresholds.
Your employer takes it straight from your wages through PAYE, the same system used for income tax and National Insurance. You don't get a bill. You don't choose to pay. It just happens automatically, every payday.
If you earn below the threshold for your plan, you pay nothing. Not a penny. And if your earnings dip below the threshold later — say you go part-time or take a career break — repayments stop until you're earning above it again.
Let's say you're on Plan 2 and earning £32,000 a year. Here's the maths:
That's it. £35 a month. It's not nothing, but it's not going to ruin your life either. And if you get a pay rise to £40,000, your repayment goes up to about £95/month — still manageable.
This is the single most important thing to understand. Your student loan does not appear on your credit file. It doesn't affect your credit score. Mortgage lenders can see it on your payslip (it reduces your take-home pay), but it's not treated as debt in the way a car loan or credit card balance would be.
The balance might look terrifying — £50,000 or more — but that number is largely irrelevant for most graduates. What matters is your monthly repayment, which is based entirely on what you earn, not what you owe.
If you're on Plan 2 or Plan 5, almost certainly not. The vast majority of graduates on these plans will never repay the full amount before it's written off. Overpaying just means handing over money you didn't need to.
The only scenario where overpaying might make sense is if you're a high earner on Plan 1 (with a relatively small remaining balance) and you'd clearly repay the whole thing before write-off anyway. Even then, run the numbers first. Use a student loan repayment calculator to model it before you commit any extra cash.
Enter your salary and plan type to see how much comes off your pay each month.