Student loan repayments are the deduction people understand least and worry about most. They are not really a loan in the way a mortgage is a loan, they are collected in a way that produces some odd results on a single payslip, and the advice that circulates about paying them off early is wrong for most borrowers. Here is how the system actually operates in 2026/27.
Which plan you are on
You do not choose. Your plan is set by which country's funding body lent you the money and when your course started.
| Plan | Who is on it | Annual threshold | Rate | Written off |
|---|---|---|---|---|
| Plan 1 | England or Wales, course started before 1 September 2012. All Northern Ireland students. | £26,900 | 9% | 25 years after the April you were first due to repay, if the first loan was paid on or after 1 September 2006 |
| Plan 2 | England, course started 1 September 2012 to 31 July 2023. Wales, course started on or after 1 September 2012. | £29,385 | 9% | 30 years after the April you were first due to repay |
| Plan 4 | All Scottish students, whatever the course or start date. | £33,795 | 9% | 30 years after the April you were first due to repay, if the first loan was paid on or after 1 August 2007 |
| Plan 5 | England, course started on or after 1 August 2023. | £25,000 | 9% | 40 years after the April you were first due to repay |
| Postgraduate Loan | England and Wales master's and doctoral loans. | £21,000 | 6% | 30 years after the April you were first due to repay |
Postgraduate borrowers in Northern Ireland are on Plan 1 and in Scotland on Plan 4, rather than having a separate postgraduate plan. If you have both an undergraduate and a postgraduate loan from England or Wales, you repay both at once, which is where the arithmetic starts to hurt.
The Arithmetic
You repay a percentage of what you earn above the threshold, never a percentage of everything. That is the single most misunderstood point.
Someone on £34,000 with a Plan 2 loan earns £4,615 above the £29,385 threshold. Nine per cent of that is £415.35 a year, or about £34.61 a month.
Give that same person a Postgraduate Loan as well and it changes considerably. The postgraduate threshold is £21,000, so £13,000 of their salary is above it, and 6% of £13,000 is £780. Their combined repayment becomes £1,195.35 a year, close to £100 a month, and their marginal rate on anything they earn above £29,385 is 15% before income tax and National Insurance have taken their share.
You will notice small differences between an annual calculation and what appears on your payslip. That is because HMRC gives payroll rounded monthly and weekly thresholds, £2,448 a month for Plan 2 for example, rather than dividing the annual figure exactly. Over twelve months the difference amounts to a few pounds.
Why a bonus triggers a deduction you should not have paid
Student loan repayments are collected per pay period, in the same way National Insurance is, rather than cumulatively across the year like income tax. Payroll looks at what you earned this month, compares it to the monthly threshold, and deducts. It has no view of your annual total.
So consider someone on Plan 2 earning £26,000, comfortably below the annual threshold, who receives a £2,000 bonus in December. That month their pay is £4,166.67. Against a monthly threshold of £2,448, that leaves £1,718.67 above the line, and 9% of it is £154.68 deducted.
Their income for the year was £28,000. That is below the £29,385 Plan 2 threshold, so they should have repaid nothing at all. GOV.UK is explicit that you can ask for a refund at the end of the tax year in exactly this situation, once HMRC has confirmed your annual income. Sign in to your student loan account to claim it. Nobody will do it for you.
The same principle covers a few other refundable situations: repayments taken before you were due to start repaying, repayments taken after the loan was cleared, and repayments taken on the wrong plan because your employer set you up incorrectly. The one thing you cannot get back is a voluntary extra payment you chose to make.
Two jobs, and self-employment
With two employments, each job is assessed against the threshold on its own. GOV.UK states that you repay only on income from a job that pays over the threshold, not on your combined income. Two jobs of £20,000 each on Plan 2 therefore produce no repayments at all through PAYE, despite a £40,000 total. This is not a loophole to exploit quietly, because if you also complete a Self Assessment return your combined income is assessed there.
If you are self-employed, or have employment and self-employment together, HMRC works the repayment out from your Self Assessment return using your income for the whole year. That removes the pay period quirk entirely.
Interest, and why it matters less than you think
Interest is charged from the day the first payment reaches your university. Rates are set centrally and change, so check the current figures on GOV.UK rather than trusting a number you read once. At the time of writing, GOV.UK shows 4.1% on Plans 1, 4 and 5, 6% on Postgraduate Loans, and a variable rate on Plan 2 that depends on income and is subject to a cap.
For most Plan 2 and Plan 5 borrowers, the interest rate is close to irrelevant. What you repay each month is fixed by your salary, not by your balance. If you are never going to clear the loan before it is written off, a higher interest rate simply means a bigger number gets cancelled in thirty or forty years. It does not cost you a penny more along the way.
Should You Overpay?
Usually not, and this is where a lot of well-meant advice goes wrong.
Ask one question first: are you realistically going to repay the whole balance before the write-off date? If the answer is no, every voluntary pound you throw at it is a pound you will never see again, and it buys you no reduction in your monthly deduction. It is not refundable either.
If the answer is yes, and it often is for Plan 1 borrowers with modest balances and decent salaries, overpaying can genuinely save interest. Even then, compare it honestly with clearing a credit card, building an emergency fund, or getting a workplace pension match, all of which usually win.
One thing that is worth doing near the end: when you are within roughly the last couple of years of clearing the balance, the Student Loans Company will normally offer to switch you to direct debit so that PAYE does not carry on deducting past the finish line. That only works if they can reach you, so keep your contact details current with them, and tell them before you move abroad, because different rules apply once you leave the UK.
Checking Your Payslip
Your payslip should show the deduction on its own line, and many show the plan type. If you have recently changed jobs, confirm the plan is right: the starter checklist you complete on day one is where the wrong plan usually gets set, and it is one of the more common payroll errors alongside the tax code problems covered in our emergency tax code article. You can compare your expected deduction against the net pay calculator in under a minute, and our payslip guide explains the surrounding lines.
This is general information about how repayments are collected, not financial advice, and the thresholds quoted are for the 2026/27 tax year. GOV.UK carries the current figures and the Student Loans Company holds your actual balance, so both are worth a look before you make any decision about paying anything extra.