UK Student Loans 2026-27: Repayments, Thresholds and Write-Off Rules

A UK student loan sits on your record as a big scary number, but it does not behave like a credit card or a personal loan. Repayments only start once your income crosses a set threshold, they stop again the moment your earnings fall back below it, and the balance is written off after a fixed period whether or not you ever cleared it.

Because of that, the right question for most borrowers in 2026-27 is not "how do I pay this off?" but "will I ever repay this in full given my likely earnings, and if not, how much of it will actually come out of my pocket?" That is a different calculation from any other debt.

This page covers UK student loans issued by the Student Loans Company in England, Wales, Scotland and Northern Ireland. It is general information for UK residents, not personal financial advice or regulated debt advice.

Which plan are you on?

Everything else depends on the plan. Which one applies to you comes down to where you studied, when you started your course, and whether it was undergraduate or postgraduate. GOV.UK: which repayment plan you are on is the definitive lookup.

Sources: GOV.UK: how much you repay, GOV.UK: when your loan gets written off.

Two things worth pulling out. First, if you have a Postgraduate Loan on top of an undergraduate loan, both are deducted from your salary at the same time (9% for the undergraduate, 6% for the postgraduate, above their separate thresholds). Second, if you moved between countries in the UK during your studies, the plan is set by the country whose funding body paid your tuition, not by where you actually live now. That rule sits in Part 2 of the Education (Student Loans) (Repayment) Regulations 2009, and is why a Welsh-domiciled Plan 2 borrower who now lives in Northern Ireland still repays as a Plan 2 borrower. Regulation 80(3) is the only part of those Regulations that extends to Northern Ireland directly, and it mirrors the bankruptcy and IVA exclusions covered later in this article for Northern Irish borrowers. It reaches Plans 1, 2, 3 and 5. Plan 4 loans are Scottish, so no separate Northern Ireland extension is needed for them.

How repayments actually work

Repayments come out of your salary through PAYE, the same system that collects income tax. The Student Loans Company does not send you a bill and does not chase you for missed payments in the way a credit card issuer would. When your monthly earnings are above the threshold, 9% (or 6% for postgrad) of the excess is deducted. When they drop below, the deduction stops.

Two worked examples make it concrete.

• Plan 2 borrower earning GBP 35,000 a year. That is GBP 5,615 above the Plan 2 threshold of GBP 29,385. Annual repayment: 9% of GBP 5,615 = GBP 505. Monthly gross deduction: about GBP 42.
• Plan 5 borrower earning GBP 32,000 a year. That is GBP 7,000 above the Plan 5 threshold of GBP 25,000. Annual repayment: 9% of GBP 7,000 = GBP 630. Monthly gross deduction: about GBP 52.

Two important quirks. First, the threshold is applied on a pay-period basis, not a yearly total. If you earn a large bonus in one month, PAYE will deduct student loan on that bonus even if your yearly income ends up below the annual threshold. You can claim that back at the end of the tax year (see Claiming a refund). Second, if you have more than one job, each employer applies the threshold separately, which can mean you underpay across the year and end up with a balancing figure due through Self Assessment.

If you are self-employed, the deduction is collected through your Self Assessment tax return, based on total profit above the threshold, and due by 31 January following the tax year.

Interest: how it is charged

Interest is added to the balance daily. The rate depends on the plan, and for Plan 2 also on income.

• Plan 1, Plan 4 and Plan 5 are set at RPI or the Bank of England base rate plus 1%, whichever is lower. The current rate is 4.1%.
• Plan 2 while you are still studying: RPI plus 3%, currently capped at 6%. After finishing the course, income-linked as shown below.
• Postgraduate Loan: RPI plus 3%, currently capped at 6%.

Source: GOV.UK: repayment plan interest rates. For most Plan 2 borrowers, that interest number matters less than it looks. Read why the interest rate panic misses the point for the reason.

One detail almost every competitor page misses: for the 2026-27 academic year, Plan 2 and Plan 3 (postgraduate) interest rates are capped at 6% by SI 2026/743. The cap runs from 1 September 2026 to 31 August 2027 and works by deeming the formula rate to be 6% whenever the calculation exceeds it. So a headline that says Plan 2 interest has risen to 7% or more is describing the underlying formula, not what any borrower is actually being charged this year.

When your student loan gets written off

This is the section most people miss, and it is where UK student loans stop behaving like normal debts.

Every UK student loan has a write-off date built in. Once that date is reached, the outstanding balance is cancelled by the Student Loans Company. There is no tax bill on the cancelled amount, no impact on credit files, and no ongoing enforcement. The loan simply ends.

Source: GOV.UK: when your student loan gets written off or cancelled.

Beyond the standard write-off date, three other events cancel the loan.

• Death. UK student loans are cancelled on death. The estate is not chased for the balance. No inheritance tax is due on the written-off amount. This is one of the few UK debts that does not survive the borrower.
• Permanent inability to work due to illness or disability. If a doctor confirms you are permanently unable to work, the Student Loans Company can cancel the loan. The evidence bar is high (permanent means for the rest of your working life, not a temporary spell of ill health), but the route exists.
• Bankruptcy. Contrary to some older articles, student loans are not written off through personal bankruptcy in England and Wales. They are excluded debts. So bankruptcy will not help.

The consequence of the write-off rule is the single most important thing about a UK student loan: for many borrowers, the balance shown in the SLC account is a number they will never fully repay. According to the Institute for Fiscal Studies, only about half of Plan 2 borrowers are projected to fully repay before the 30-year write-off (IFS: student loans in England). For Plan 5 borrowers, on a lower threshold and a longer 40-year term, the projected full-repayment share is significantly higher.

When to consider overpaying (and when not to)

The instinct with any debt is to try to pay it off faster. With a UK student loan, that instinct is often wrong.

Because the balance is written off after 25 to 40 years depending on the plan, overpayments only make sense if you would otherwise have cleared the loan through normal PAYE deductions before the write-off date. If you would not have cleared it, an overpayment simply hands the SLC money that they would never have collected anyway.

The right test is not "how big is my balance?" but "am I on track to clear this before it gets written off?" That is a projection question, not a today question. A student loan calculator (the SLC provides one in the online account) will estimate your repayment based on current earnings, but you will need to think about likely future income too. If you are unsure, keeping the money in an ISA or paying down a genuinely enforceable debt like a credit card is usually the safer call.

Claiming a refund if you have overpaid or been on the wrong plan

There are four situations where the Student Loans Company will refund repayments you should not have made. All routes go through your online student loan account or a phone call to the SLC.

1. You paid more than the total balance owed. HMRC should tell your employer to stop deducting once the loan is cleared, but this can take about four weeks. Any extra deducted after that is refunded automatically as "SLC Receipts" on your bank statement. If nothing arrives, sign in to your account and request the refund.
2. Your annual income across the whole tax year was below the threshold. If PAYE deducted student loan in some months because your monthly pay was above the pro-rata threshold, but your total annual income came in below the yearly threshold (for example due to seasonal work, unpaid leave, or a mid-year job change), you can claim it back. Sign in to your online account and ask for a refund. This can only be claimed after the tax year ends on 5 April, and only for tax years that have already finished.
3. Repayments started before you were due to begin repaying. Repayments should only begin from the April after you finish or leave your course. If a deduction was taken earlier, it is refundable.
4. Your employer put you on the wrong repayment plan. This only applies if you are on Plan 2 or Plan 4 but your employer had you set to another plan (for example, Plan 1). If you are on a lower-threshold plan than you should be, you are overpaying and can reclaim the excess.

Source: GOV.UK: getting a student loan refund. Note that voluntary overpayments (money you chose to send in above what PAYE deducted) are not refundable. Once paid, they stay paid.

To avoid a small overpayment at the end of the loan, GOV.UK suggests switching to Direct Debit for the last year or so of your balance, which stops the risk of PAYE taking one more instalment after the balance clears.

What a student loan means for a mortgage or a job change

UK student loans do not appear on credit files. They are not credit agreements under the Consumer Credit Act, and no credit reference agency records them. Lenders cannot see the balance directly.

But that does not mean they are invisible. A mortgage lender assesses affordability on your take-home pay after tax, National Insurance, pension contributions and student loan deductions. If you are a Plan 2 borrower on GBP 40,000, that is around GBP 79 a month of gross student loan deduction, which trims your assessable disposable income. On typical affordability multiples, that can knock a few thousand pounds off the maximum offer.

Two practical points.

• Do not lie about it on a mortgage application. Even though it is not on your credit file, most mortgage applications ask directly about student loan repayments and will show them on your payslip and bank statements. Answering incorrectly is misrepresentation.
• Overpaying to try to lower a mortgage impact does not work. The mortgage assessment cares about your monthly deduction, which is fixed by your earnings, not your balance. Overpayments cannot reduce the ongoing deduction, only the term.

For a job change, the deduction is calculated the same way at any UK employer. If you move abroad, the SLC will assess your repayments based on a foreign equivalent of the UK threshold, and you must notify them within a fixed window. Failure to notify is a common reason for penalty charges.

Plan 5: the new deal for new starters

Plan 5 covers new English undergraduates who started their course on or after 1 August 2023. The first Plan 5 repayments began in April 2026, so the first cohort has just come into repayment for the 2026-27 tax year. Plan 5 changes three things compared to Plan 2.

1. Lower threshold. GBP 25,000 for Plan 5 versus GBP 29,385 for Plan 2. More earnings fall inside the 9% window.
2. Longer term. 40 years to write-off, versus 30 years for Plan 2. Ten more years of possible deductions.
3. RPI-only interest. Interest is charged at RPI, without the RPI plus 3% margin that applies to Plan 2 while studying. This slows the balance's growth but does not change the mechanics of monthly deductions.

The net effect is that most Plan 5 borrowers will pay more over their lifetime than most Plan 2 borrowers, because the lower threshold and longer term mean they will make repayments for a lot more of their working lives. A larger proportion of Plan 5 borrowers is expected to fully clear their loan than under Plan 2, exactly because the deductions carry on for longer.

Nothing about Plan 5 changes the underlying character of the loan: it is still collected through PAYE, still 9% of earnings above the threshold, still written off at the end. What has changed is the size of the burden across the working life.

One development to watch. From 2026 the Department for Education is splitting Plan 5 loans into two sub-types, "Plan 5 LLE" and "Plan 5 non-LLE", as part of the Lifelong Learning Entitlement rollout, under a draft Statutory Instrument for 2026. LLE loans are paid under the new 2026 Student Support Regulations for modular post-18 study; non-LLE loans are traditional Plan 5 loans paid under the 2011 Student Support Regulations. Someone starting a Plan 5 loan today should not assume the repayment terms will be identical to someone starting an LLE course in 2027 or later. The draft explanatory memorandum sets out the split.

Why the interest rate panic misses the point

Every so often the RPI number spikes, the headline student loan interest rate goes up, and news pieces describe balances "spiralling out of control". For most borrowers, this is not the useful frame.

The reason: if your loan will not be fully repaid before write-off, the size of the interest rate makes no difference to what you actually pay. Your monthly repayment is 9% of income above the threshold, not a function of the balance. A higher interest rate makes the balance grow faster, but it does not increase your monthly deduction by a penny. At the end of the term, the balance (whatever it is by then) is cancelled.

Interest rate only matters if you are on track to clear the loan through PAYE before write-off, or if you are considering voluntary overpayments. For a Plan 2 borrower on average lifetime earnings, neither of those normally applies.

The Money and Pensions Service and the Institute for Fiscal Studies have both put out the same point in different words: the interest rate on a UK student loan behaves for most people like the coupon rate on a bond you will never redeem in full. It is a number that describes the balance, not the outgoing.

Why a student loan is not a debt problem for insolvency purposes

People sometimes ask whether a Debt Relief Order (DRO), bankruptcy or an IVA can clear a student loan. The short answer is no, and the mechanism is worth understanding because it comes from a specific statutory exclusion, not from Student Loans Company policy.

• DRO. Student loans are listed as excluded debts under a Debt Relief Order. They cannot be listed and are not written off through a DRO. Read the full rules in the DRO guide.
• Bankruptcy. Regulation 80(2), sub-paragraphs (a) and (b), of the Education (Student Loans) (Repayment) Regulations 2009 state that a plan 1, 2, 3 or 5 loan is not part of the bankrupt's estate and is not included in the bankruptcy debts. In plain English: bankruptcy does not clear a student loan, and the borrower remains liable during bankruptcy and after discharge. This directly contradicts the common assumption that bankruptcy wipes out every debt held at the date of the order.
• IVA. Student loans are excluded from IVAs by regulation 80(2), sub-paragraphs (c) and (d), of the same Regulations, inserted in 2010 under a specific power in section 257 of the Apprenticeships, Skills, Children and Learning Act 2009. That was the first-ever use of the power, and it is why "an IVA cannot include a student loan" is a rule, not a Student Loans Company preference. The exclusion applies whether the loan was paid before or after the IVA was approved.

The reason all three exclude student loans is the same: because repayments are tied to income, not balance, and stop automatically when income falls, a UK student loan cannot go into default in the way other debts can. There is nothing to enforce, no CCJ risk, no bailiff route, no default marker on a credit file. A student loan is not a debt problem in the sense that formal insolvency solutions are designed to solve.

If a student loan is a symptom of a wider debt picture (in other words, your PAYE deduction is real and reducing what you can afford elsewhere), the answer is to work on the wider picture. See Is a Debt Management Plan worth it? or use the Budget Planner to establish a defensible household budget first.

FAQs · UK student loans in 2026-27