Which plan you're on, the thresholds and rates, and how repayment actually happens through your payslip.
UK student loans are structured very differently from a conventional loan. There's no fixed monthly payment based on your balance, no early repayment penalty in the traditional sense, and no consequence to your credit file for the loan itself. Instead, repayment is entirely driven by how much you earn — which makes it one of the more misunderstood parts of UK personal finance, especially for people newly entering the workforce.
You repay a fixed percentage — usually 9% — of your income above a threshold that depends on your specific loan plan. Crucially, this has nothing to do with how much you actually borrowed or how much interest has accrued. Someone with a £15,000 loan and someone with a £60,000 loan on the same plan, earning the same salary, make identical monthly repayments. The loan amount only matters for how long it takes to pay off — or whether it gets written off first.
| Plan | Who it applies to |
|---|---|
| Plan 1 | Most English and Welsh students who started before September 2012, and most Northern Irish students |
| Plan 2 | English and Welsh students who started between September 2012 and July 2023 |
| Plan 4 | Scottish students, regardless of start date |
| Plan 5 | English students starting their course from August 2023 onward |
| Postgraduate Loan | Master's or doctoral study, repaid alongside any undergraduate plan |
| Plan | Annual threshold | Repayment rate |
|---|---|---|
| Plan 1 | £24,990 | 9% |
| Plan 2 | £27,295 | 9% |
| Plan 4 | £31,395 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
If you're employed, your employer automatically deducts your student loan repayment through PAYE, alongside Income Tax and National Insurance — it appears as a separate line on your payslip. You don't need to do anything to set this up beyond ticking the relevant box when you start a new job. If you're self-employed, repayment is calculated and paid annually through Self Assessment instead.
Income above the £27,295 threshold is £4,705. At 9%, that's £423.45 per year, or roughly £35 deducted from your pay each month — a relatively modest amount that scales up as your salary grows.
Postgraduate Loan repayments are calculated separately and run alongside your undergraduate plan simultaneously — 9% above your undergraduate threshold, plus 6% above the £21,000 postgraduate threshold, both coming off your pay in the same pay period. This means someone with both loans can see a combined effective repayment rate of up to 15% on income above both thresholds.
Interest accrues on your loan balance throughout the repayment period, but because repayments are income-based rather than balance-based, many borrowers never fully pay off their loan before it's written off entirely. Write-off periods vary by plan: 25 years after becoming eligible to repay for Plan 1, and 30 years for Plan 2, Plan 4, and Plan 5. If your balance isn't cleared by the write-off date, the remaining amount — including any accrued interest — is simply cancelled, with no further obligation.
Because so many borrowers never repay their loan in full before write-off, voluntary overpayments only make financial sense for people who are confident they'll clear the loan naturally through income-based repayments before the write-off date — for these higher earners, overpaying can reduce the total interest paid over time. For most other borrowers, especially those with lower or middle incomes, extra payments effectively just reduce a balance that would have been written off anyway, providing no real benefit.
Sources: gov.uk student loan repayment guidance, Student Loans Company (SLC). This article is for informational purposes only and does not constitute financial advice.