Student loans explained
How student loan repayments work — thresholds, plans and who actually pays.
Student loans are unlike any other debt in the UK, and understanding that difference is worth thousands of pounds. Repayments are tied to your income, not the amount you borrowed, and the balance is written off after a set number of years — so it behaves more like a graduate tax than a loan.
The mechanics
You repay 9% of your income above your plan’s threshold (6% for postgraduate loans), taken automatically through payroll. Critically:
- Repayments only start when income crosses the threshold
- You only pay on the slice above it — not the whole salary
- The loan is written off after the plan’s term (typically 30 years after you became eligible to repay)
Example. Plan 2 threshold is £29,385. On a £40,000 salary you repay 9% of the £10,615 above it — about £955 a year. On £28,000, below the threshold, you repay nothing. The interest keeps accruing either way, but the write-off means most graduates never repay in full.
The plans
Which rules apply depends on your course:
- Plan 1 — started before September 2012
- Plan 2 — started 2012 to August 2023
- Plan 4 — Scottish students
- Plan 5 — started after August 2023
- Postgraduate — a separate loan, repaid at 6%
Each plan has its own threshold and interest rate, which change each September.
Why it’s not like other debt
A student loan won’t stop you getting a mortgage the way a credit card balance can, because lenders look at your take-home income rather than the loan balance. And because it’s written off eventually, there’s usually no point overpaying it — money spent early is often money you’d never have needed to repay.
When overpaying might make sense
The exception is a very high earner on a plan where the loan is likely to be fully repaid before the write-off. If you’re in the higher-rate bracket with a large balance, the interest can genuinely cost you — the student loan calculator shows your annual repayments so you can judge.
See the maths
Use the student loan calculator for your exact annual repayment, and the salary calculator to see how it affects your take-home pay.
Frequently asked questions
Do I have to repay my student loan?
Only once your income is above your plan's threshold, and then only 9% of the amount above it (6% for postgraduate loans). If your income never passes the threshold, you never repay — and the balance is written off after the plan's term.
Which plan am I on?
Plan 1 for courses started before September 2012, Plan 2 for 2012–2023, Plan 4 for Scottish borrowers, and Plan 5 for courses starting after August 2023. Postgraduate loans are repaid separately at 6%.
Can I overpay my student loan?
Generally you shouldn't. Unlike a mortgage, the balance is written off after a set period and repayments are income-based, so overpaying often costs you money you'd never have had to repay. Exceptions exist for high earners — check the numbers first.
Does a student loan affect my credit score?
Student loans are not recorded in your credit file, so they don't affect mortgages or other borrowing like normal debt does. Lenders look at your take-home income instead.
Try the calculators
Put the numbers from this guide into practice with our free tools.
This guide is for general information only and is not professional financial, tax or legal advice. UK rates and rules change, so always verify important figures with official GOV.UK / HMRC information or speak to a qualified professional. See our full disclaimer.
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