How will student loan repayment work?
How to Pay Off Your Student Loan in the UK: Complete Guide for 2025/26
If you've reached the income threshold and started making student loan repayments, or if you think you're getting close, and those payments are making you feel more worried about your finances, you're definitely not alone. In the UK, over 2.6 million people now owe more than £50,000 in student debt, and the average graduate leaves university with about £53,000 in loans. It’s completely understandable that student loan repayments can sometimes feel like a lot to handle.
Here's the thing: if you're struggling financially and your Student Loans Company debt is causing you stress, the first rule is simple: don't panic. The best thing you can do right now is get back into university mode and educate yourself on how your student loan actually works and what your repayment options really are.
Understanding the Student Loans Company and How It Works
Just so you know, the Student Loans Company generally relies on you to update them about your employment status. They aren't particularly proactive when it comes to tracking whether you're working or what you're earning. This means they may not actually know if you're due to make payments or not.
However, they do have a partnership with HM Revenue and Customs (HMRC). If you're paying tax via PAYE, your earnings are recorded, and repayments are usually deducted automatically once you exceed the threshold.
The key point? The system is mostly automated, but it's important to stay aware of your repayment status to prevent overpayments or underpayments. Overpayments do happen, and according to a 2019 BBC investigation, more than 510,000 students overpaid their loans between 2009 and 2018, with £28 million unclaimed. More recent data indicates that over 59,000 graduates overpaid in 2023/24, totalling £23.1 million in unclaimed refunds. Therefore, always check if you're entitled to a refund.
If you're having a hard time making your payments, don't worry, we're here to support you.
Let's get straight to it.
Three Steps to Managing Your Student Loan Repayments
Step 1: Identify Which Student Loan Repayment Plan You're On
The first thing you need to do is figure out which payment plan you're on. Your plan determines when you start repaying, how much you repay, and what interest rate you're charged. If you don't know which plan you're on, head over to 'Student Loan Repayments - Everything you need to know' to work it out, then come straight back.
The main plans are:
- Plan 1: For students who began before September 2012 in England and Wales
- Plan 2: For students who began after September 2012 in England and Wales
- Plan 4: For students who studied in Scotland
- Plan 5: For students who started courses on or after 1 August 2023 in England, but repayments for most Plan 5 borrowers will not begin until the 2026/27 tax year, i.e., from April 2026 (or the April after you leave your course, whichever is later).
- Postgraduate Loan: For Master's or Doctoral loans
- Northern Ireland: If you took out your loan in Northern Ireland, the repayment rules are similar to those of Plan 1 but with different write-off conditions.
Step 2: Check If You've Reached the Student Loan Repayment Threshold
Next, you need to check whether you've actually reached the income threshold to repay your student loan. If the Student Loans Company is already deducting payments from you, it means you've reached the threshold for your plan, and you've probably informed your employer or HMRC that you have a student loan.
The thresholds typically change each April, but occasionally they remain unchanged for several years because of government policy instead of increasing with inflation.
Here are the thresholds for 2025/26 (tax year starting 6 April 2025):
PLAN 1
- Pay when your annual income is above £26,065 (£501 per week or £2,172 per month).
- Note: If your first loan was taken out before 1 September 2006, the debt is written off at age 65.
PLAN 2
- Pay when your annual income is above £28,470 (£547 per week or £2,372 per month).
- Interest Rate: Plan 2 rates are income-dependent:
- If you earn £28,470 or less: 3.2%
- If your income is between £28,471 and £51,245, the rate increases gradually from 3.2% to 6.2%.
- If you earn over £51,245: 6.2%
PLAN 4
- Pay when your annual income is above £32,745 (£629 per week or £2,728 per month).
- Note: If your first loan was taken out before 1 August 2007, your debt is written off at age 65 or 30 years after first due to repay (whichever comes first).
PLAN 5
- Pay when your annual income is above £25,000 (£480 per week or £2,083 per month).
- Repayment Start: Repayments for most Plan 5 borrowers will begin from April 2026, or the April after you leave your course, whichever is later.
POSTGRADUATE LOAN PLAN
- Pay when your annual income is above £21,000 (£403 per week or £1,750 per month).
How Much Do You Repay?
It’s straightforward: you pay a percentage only on the amount you earn above your plan’s income threshold, not on your entire salary.
Plans 1, 2, 4 and 5
If your income goes above the repayment threshold for your plan, you repay 9% of the amount you earn above that threshold.
Example (Plan 2, 2025/26):
The repayment threshold is £28,470 annually. If your income is £30,000, it exceeds this threshold by £1,530 (£30,000 − £28,470). You will repay 9% of this excess, which amounts to £137.70 per year, approximately £11.50 each month.
Postgraduate Loan
Once your income exceeds £21,000 per year, you repay 6% of the amount you earn above that threshold.
Example:
If you earn £23,000, your income exceeds the threshold by £2,000 (£23,000 − £21,000). Your repayment is 6% of £2,000, amounting to £120 annually — approximately £10 each month.
Note:
- If your earnings are below your threshold, you will not pay anything.
- These payments are deducted automatically from your wages or tax return.
If your total annual income ends up below your threshold due to a change in circumstances, you can request a refund for payments made in that tax year.
If you don’t meet the income threshold, you won’t need to make any repayments.
Step 3: Your Student Loan Repayment Options
If you’re already struggling with debt, here’s what you need to know:
- Contact SLC if repayments become unaffordable: They can assist in arranging payments based on genuine financial difficulty and will not chase payment mistakenly.
- Overpayments: If you’ve repaid when under the threshold or due to an admin error, sign into your SLC account and request a refund.
Clearing Your Loan with a Personal Loan – The Risks
While some people consider taking out a personal loan to pay off student debt, we must point out that we never recommend borrowing. Also, this is generally not advisable for most borrowers.
- Student loans won't appear on your credit report like other loans; instead, only your repayment status affects your take-home pay.
- Student loan repayments vary with your income and are automatically paused if your earnings fall below the threshold. Personal loans require fixed payments regardless.
- Student loans can eventually be written off (see below) and do not affect your credit in the same way.
- Student loan interest rates are generally lower than those of unsecured personal loans for most borrowers.
- Voluntary overpayments: You can make additional payments towards your student loan at any time, without penalty.
Clearing Your Loan with a Personal Loan – The Benefits
If you're a high earner facing higher Plan 2 interest rates (up to 6.2%), an unsecured personal loan might offer lower monthly repayments and interest rates compared to your current student loan.
Additional benefits of using a personal loan:
- Consumer Credit Act protection: Personal loans are covered by the Consumer Credit Act, ensuring you are protected by FCA rules. If you encounter financial difficulties, Section 7.3.5 of the FCA Handbook (CONC) allows you to make 'token payments,' which can be as low as £1 per month, to help you recover financially.
- Potentially lower interest rates: Depending on your credit score and the lender, personal loan rates can sometimes be lower than student loan interest, especially for Plan 2 borrowers earning over £51,245.
- A personal loan offers a fixed repayment timeline, unlike student loans that can last 25-40 years. Typically, you'll be done paying in 3-7 years, giving you a clear sense of when you'll be debt-free.
Important considerations:
This isn't a decision to take lightly, as it involves further borrowing. Personal loans don't provide the same income-linked flexibility as student loans, and you lose the automatic write-off protection that comes with student debt.
If you're struggling with your personal loan repayments, don't panic — we have options that can ease the strain. Check out our article ‘Token Payments UK: Reduce Debt Repayments When You Can't Afford to Pay’.
When Does Your Student Loan Get Written Off?
Knowing when loans are written off is key to planning your repayments. Here’s a simple breakdown for you:
- Plan 1: Written off 25 years after the April you were first due to repay, or at age 65 if your first loan was before September 2006.
- Plan 2: Written off 30 years after the April you were first due to repay.
- Plan 4: Written off 30 years after the April you were first due to repay, or at age 65/30 years (whichever occurs first) if the loan was before August 2007.
- Plan 5: Written off 40 years after the April you were first due to repay.
- Postgraduate Loan: Written off 30 years after the April you were first due to repay.
Most graduates do not repay their full loan before it is written off. Government estimates suggest only 56% will ever fully clear their balance, and frozen thresholds mean more will reach write-off than before.
How to Claim a Student Loan Refund If You've Overpaid
If you repaid while your earnings were below the threshold or if there was a mistake, you might be eligible for a refund.
- How to claim: Log in to your Student Loans Company repayment account, request a refund online, and update your bank details.
- Statistics: In 2023/24, over £23 million in overpayments remained unclaimed; annual figures vary, so always check if you’re owed money.
Remember to read The Real Debt Guy's final thoughts below!
The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.
