UK Student Loans 2026 — The Complete Guide
Student loans are one of the most misunderstood financial products in the UK. Understanding how they actually work can fundamentally change how you think about your finances.
Plan 2 vs Plan 5 Key Differences
| Plan 2 | Plan 5 | |
|---|---|---|
| Repayment threshold | £27,295/year | £25,000/year |
| Repayment rate | 9% above threshold | 9% above threshold |
| Write-off period | 30 years | 40 years |
| Interest rate | RPI + up to 3% | RPI only |
Plan 2 covers students who started before August 2023. Plan 5 covers those starting from September 2023.
How Repayment Works
You only repay 9% of earnings above the threshold. On Plan 5 with a £35,000 salary: £35,000 minus £25,000 is £10,000, and 9% of that is £900 per year or £75 per month. Repayments stop automatically if your salary drops below the threshold.
Should You Pay It Off Early?
For most people, no. If you will not earn enough to clear the balance before the write-off date, any extra repayments are lost money when the debt is cancelled. The loan does not affect your credit score.
High earners expecting salaries above £60,000 should model their own numbers. Paying off early can make sense for a small minority.
Repayment thresholds are reviewed annually by the government.