How UK student loan repayments work
It is a graduate tax, not a normal debt
A UK student loan looks nothing like a credit card or a car loan, and treating it like one leads most graduates astray.
You do not get a bill, there is no fixed monthly payment, and missing a "payment" is impossible — because repayments come straight out of your salary through PAYE, exactly like Income Tax and National Insurance. If you stop earning, you stop repaying.
The single most important rule: you repay 9% of what you earn above a threshold (6% for a Postgraduate Loan), not 9% of your whole salary, and never anything on income below the threshold. Because the deduction is tied to income rather than to the size of the balance, the loan behaves far more like a temporary graduate tax than a debt — which changes almost every decision you might make about it.
The 2026/27 repayment thresholds
Which threshold applies depends on your plan. For the 2026/27 tax year the annual thresholds are: Plan 1 — £26,900, Plan 2 — £29,385, Plan 4 (Scotland) — £33,795, Plan 5 — £25,000, and Postgraduate — £21,000. Plans 1, 2, 4 and 5 all repay at 9% of income above their threshold; the Postgraduate Loan repays at 6%.
Earn below your threshold and your payslip shows £0 towards the loan that period. Earn above it and 9% of only the excess is taken. On Plan 2 (£29,385) a £35,000 salary repays 9% of £5,615 — about £505 a year, or roughly £42 a month. The student loan repayment calculator works this out for any salary and plan instantly.
Which plan am I on?
Your plan is set by where and when you studied, not by choice. Plan 1 covers older loans (English/Welsh students who started before 2012, plus some Northern Irish borrowers). Plan 2 covers most English and Welsh students who started an undergraduate course between 2012 and July 2022. Plan 5 applies to courses starting from August 2023 onwards. Plan 4 is for Scottish borrowers. A Postgraduate Loan (Master’s or Doctoral) sits on top of any undergraduate plan.
If you have both an undergraduate plan and a Postgraduate Loan, the two deductions are taken at the same time — 9% above your undergraduate threshold plus 6% above £21,000 — so a high earner can see both lines on one payslip. You can confirm your plan in your online student loans account.
Interest, and why overpaying rarely pays
Interest is charged (linked to RPI, and on some plans rising with income), so balances can grow — but here is the counter-intuitive truth that trips up new graduates: for many borrowers the interest rate is almost irrelevant, because the loan is written off after a set period whether or not it is repaid in full. If you are never going to clear the balance before it is cancelled, overpaying simply hands money to the Student Loans Company that you would otherwise have kept.
Only borrowers who will clear their loan well before the write-off date — typically higher earners with smaller balances — benefit from overpaying. For everyone else, the 9% behaves like a time-limited tax that ends on a fixed date, and extra voluntary payments are usually the wrong move. This is the opposite of how you would treat a credit card, which is exactly why the "graduate tax" framing matters.
When the loan is written off
Every plan has a write-off date after which any remaining balance is cancelled, tax-free. The period depends on your plan and when you started: Plan 5 loans are written off 40 years after you become due to repay; Plan 2 after 30 years; Plan 1, Plan 4 and Postgraduate loans have their own periods (commonly 25–30 years, or at a set age for the oldest loans). Because of this, a large share of borrowers — especially Plan 5 graduates on average salaries — will never repay the full amount, and the write-off, not the balance, is what really caps the cost.
This is also why your salary, not your balance, is what determines what you actually pay. Two graduates with very different debts but identical careers can pay exactly the same over their lifetime. Always check the precise write-off rules for your plan on gov.uk.
What it means for everyday money decisions
Treating the loan as a graduate tax changes the right answers. A pay rise still leaves you better off — you only ever repay 9% of the extra, keeping 91% (before Income Tax and NI). A pension contribution via salary sacrifice lowers the salary the 9% is calculated on, so it can quietly reduce your student loan deduction as well as your tax — one reason pensions are so efficient for graduates.
And when a mortgage lender assesses you, the student loan deduction reduces your take-home pay and therefore your borrowing power, but it is not a "debt" they count against you in the usual way. To see the loan alongside Income Tax and National Insurance in one place, read our UK take-home pay guide or run your salary through the take-home pay calculator.