What Is Student Loan Repayment Plans?
By PayMetric Labs Research Desk
Short answer
UK student loans are repaid automatically through your salary once you earn above a plan-specific threshold, with Plan 1, 2, 4, and 5 (plus Postgraduate Loan) each using different thresholds and rates.
Which plan you're on depends on when and where you studied. Plan 1 (started before September 2012, England/Wales/NI) repays 9% of income above £24,990. Plan 2 (September 2012 to July 2023, England/Wales) also repays 9%, but above a higher £27,295 threshold. Plan 4 (Scotland, applied after August 2021) repays 9% above £31,395. Plan 5 (England, started from August 2023) repays 9% above £25,000. A Postgraduate Loan repays 6% above £21,000 and can run alongside an undergraduate plan.
Repayments come out through PAYE automatically, calculated on income above the threshold only, not your whole salary. If you have both an undergraduate and postgraduate loan active, both repayments apply simultaneously, which can add up to 15% of income above the combined thresholds.
Because it's a flat percentage above a threshold rather than a banded tax, student loan repayment behaves like an additional marginal tax rate on income right around your threshold, worth factoring into any pay rise or bonus calculation.
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This glossary entry is for general information only and does not constitute financial, tax, or legal advice. Rates and thresholds shown reflect current published guidance and may change.