UK Student Loan Repayments — Plan 1 vs Plan 2 vs Plan 3 vs Plan 4
UK Student Loan Repayments: Plan 1, Plan 2, Plan 3, and Plan 4 Compared
In the United Kingdom, student loan repayments are structured differently from standard commercial debt. Instead of paying a fixed amount each month based on your outstanding balance, your repayments are calculated as a percentage of your salary above a specific threshold. If your income falls below the threshold, repayments stop automatically.
This guide details the different student loan plans for the 2026/27 tax year, outlining the repayment thresholds, calculation rates, and how having multiple plans affects your monthly paycheck.
Overview of UK Student Loan Plans
Which plan you are on depends on when and where you started your higher education course:
- Plan 1: For courses starting before September 1, 2012 (England and Wales), or all courses from Northern Ireland.
- Plan 2: For undergraduate courses starting between September 1, 2012, and July 31, 2023 (England and Wales).
- Plan 3 (Postgraduate Loan): For master's or doctoral courses starting in England and Wales.
- Plan 4: For undergraduate courses from Scotland.
2026/27 Repayment Thresholds and Rates
Each plan operates with its own specific threshold and repayment rate:
| Plan Type | Annual Threshold | Repayment Rate | Calculation Base |
|---|---|---|---|
| Plan 1 | £24,990 (£2,082.50/mo) | 9% | Income above £24,990 |
| Plan 2 | £27,295 (£2,274.58/mo) | 9% | Income above £27,295 |
| Plan 3 (Postgraduate) | £21,000 (£1,750.00/mo) | 6% | Income above £21,000 |
| Plan 4 | £31,395 (£2,616.25/mo) | 9% | Income above £31,395 |
Note: Student loan repayments are calculated on your gross pay before income tax and National Insurance, but after pension deductions made under a Net Pay or Salary Sacrifice arrangement.
How Student Loan Repayments are Calculated
Your repayments are calculated per pay period (typically monthly). Let's run through worked examples:
Example 1: Monthly Gross Salary of £3,500 (Plan 2)
- Monthly Threshold for Plan 2: £2,274.58
- Income exceeding threshold: £3,500 - £2,274.58 = £1,225.42
- Monthly Student Loan Repayment (9% of £1,225.42): £110.28
Example 2: Monthly Gross Salary of £4,500 (Plan 1 & Postgraduate Plan 3)
If you have both an undergraduate loan (Plan 1) and a postgraduate loan (Plan 3), you make repayments on both simultaneously:
- Plan 1 Repayment:
- Monthly Threshold: £2,082.50
- Income exceeding threshold: £4,500 - £2,082.50 = £2,417.50
- Monthly repayment (9% of £2,417.50): £217.57
- Plan 3 Repayment:
- Monthly Threshold: £1,750.00
- Income exceeding threshold: £4,500 - £1,750 = £2,750.00
- Monthly repayment (6% of £2,750.00): £165.00
- Total Student Loan Deductions: £217.57 + £165.00 = £382.57 per month
Key Rules to Keep in Mind
- Non-Cumulative Calculation: If you receive a bonus that pushes your pay above the threshold in a single month, repayments are deducted for that month, even if your total annual salary falls below the threshold. You can apply for a refund at the end of the tax year if this occurs and your annual income was below the threshold.
- Auto-Deduction: Repayments are automatically handled by your employer through PAYE based on the tax code instruction sent by HMRC. You do not need to make manual payments unless you are self-employed, in which case repayments are calculated on your self-assessment tax return.
- Interest Rates: Interest is added to your loan balance continuously. The rate depends on inflation (Retail Price Index) and varies between plans, but the outstanding balance does not change your monthly repayment amounts.