# UK Student Loan Repayment in 2026: Plan 2, Plan 5 and When to Overpay > Everything UK graduates need to know about student loan repayments in 2026 — from Plan 2 and Plan 5 thresholds to interest rates, write-off timelines, and whether making voluntary overpayments ever makes financial sense. *Section: Personal Finance — By Emily Chen — Published April 6, 2026 — 7 min read* Canonical URL: https://dailyjunction.org/business-finance/uk-student-loan-repayment-2026 Tags: student loans, personal finance, Plan 2, Plan 5, student debt, UK finance, graduate finance, loan repayment, money, education ## Key takeaways - Plan 2 borrowers repay 9% of earnings above £27,295, while Plan 5 borrowers face a lower threshold of £25,000 but a longer 40-year write-off window — understanding which plan you are on is the essential first step. - Interest on Plan 2 loans is set at RPI plus up to 3%, whereas Plan 5 charges a simpler RPI-only rate, making Plan 5 structurally cheaper in high-inflation environments despite its longer repayment term. - Voluntary overpayments are rarely beneficial for most graduates because unpaid balances are written off after the plan period ends — only those on high, sustained salaries with low outstanding balances should seriously consider paying extra. # UK Student Loan Repayment in 2026: Plan 2, Plan 5 and When to Overpay Millions of UK graduates are currently making student loan repayments without fully understanding the rules that govern them. Which plan are you on? What threshold applies? Is interest quietly compounding on your balance? And crucially — should you ever consider paying more than you have to? With two separate repayment systems now running in parallel for English students, and with interest rates having shifted considerably since the high-inflation years of the early 2020s, 2026 is an important moment to get to grips with exactly how your student debt works. This guide cuts through the confusion. --- ## Understanding the Two Main Plans: Plan 2 and Plan 5 If you started an undergraduate course in England between 1 September 2012 and 31 July 2023, you are almost certainly on **Plan 2**. If you began an undergraduate degree in England from August 2023 onwards, you are on the newer **Plan 5** system introduced as part of the 2022 higher education finance reforms. Students from other parts of the UK operate under different arrangements — Plan 1 for pre-2012 English and Welsh borrowers, and a separate Scottish system — but Plan 2 and Plan 5 are the plans affecting the largest number of current graduates. **Plan 2 at a glance:** - Repayment threshold: £27,295 (frozen until April 2025, subject to future uprating) - Repayment rate: 9% of earnings above the threshold - Interest rate: Retail Price Index (RPI) plus up to 3%, depending on income - Write-off period: 30 years after the April following your first repayment **Plan 5 at a glance:** - Repayment threshold: £25,000 - Repayment rate: 9% of earnings above the threshold - Interest rate: RPI only (no additional earnings-based premium) - Write-off period: 40 years after the April following your first repayment The lower threshold on Plan 5 means graduates on this plan begin repaying at a lower salary, and they continue repaying for a decade longer before any remaining balance is wiped. However, the simpler interest structure — RPI only, rather than the Plan 2 formula of up to RPI plus 3% — means that for borrowers who do carry significant balances across many years, Plan 5 debt grows more slowly in interest terms. --- ## How Repayments Are Actually Calculated Student loan repayments are collected through the PAYE system for most employees, which means they are deducted automatically from your salary before you see your take-home pay. Self-employed graduates declare repayments through Self Assessment. The calculation is straightforward: take your annual salary, subtract the repayment threshold, and apply a 9% rate to the remainder. For a Plan 2 graduate earning £35,000: - Earnings above threshold: £35,000 − £27,295 = £7,705 - Annual repayment: 9% × £7,705 = **£693** (approximately £58 per month) For a Plan 5 graduate earning the same salary: - Earnings above threshold: £35,000 − £25,000 = £10,000 - Annual repayment: 9% × £10,000 = **£900** (approximately £75 per month) The difference in monthly deductions at this salary level is modest — around £17 — but over a full working career the cumulative gap can be considerable. Repayments pause automatically if your income drops below the relevant threshold, meaning periods of part-time work, career breaks, or lower-paid roles do not lead to debt default. --- ## Interest Rates in 2026: What is Actually Happening to Your Balance One of the most misunderstood aspects of student loans is how interest accumulates. Many graduates assume their balance is roughly static, when in reality it can grow significantly during low-earning years. For **Plan 2**, the interest rate is linked to RPI. While you are studying, interest accrues at RPI plus 3%. Once you begin repaying, the rate slides depending on your income: it is RPI only if you earn at or below the repayment threshold, and scales up to RPI plus 3% once your income exceeds £49,130. In the high-inflation period of 2022–23, this meant some Plan 2 borrowers saw their balances increase by over 12% in a single year. For **Plan 5**, interest is charged at RPI throughout — both during study and during repayment — regardless of how much you earn. This is a meaningful improvement for graduates who go on to earn well, as there is no earnings-related premium compounding their balance during higher-earning years. In practice, for the majority of graduates whose total lifetime repayments will not clear the full balance before write-off, the interest rate matters less than it might seem — because the balance is eventually wiped regardless. The rate becomes critical only for higher earners who are genuinely on track to repay everything before the write-off date. --- ## When Does Overpaying Your Student Loan Actually Make Sense? This is where many graduates make costly mistakes, often nudged towards overpayments by well-meaning family members or financial advice that does not apply to the UK income-contingent system. The core principle: **a student loan is not like a mortgage or a credit card.** You repay a fixed percentage of income, not a fixed monthly amount. If the balance is never fully repaid, it is written off at no further cost. This means overpaying only makes financial sense in a specific and relatively rare scenario. **Overpaying makes sense when:** - You have modelled your lifetime repayments and can demonstrate that your projected contributions will exceed your total outstanding balance before write-off - You have no higher-rate debt (credit cards, personal loans) that would benefit more from the same capital - You have already maximised any employer pension match and built an emergency fund **Overpaying is likely wasteful when:** - Your balance is large relative to your current salary - You are early in your career with decades until the write-off date - You have consumer debt carrying interest above the student loan rate Independent comparison resources such as [QuidCompare](https://quidcompare.co.uk) publish detailed guides on UK financial products that can help you benchmark whether redirecting surplus funds elsewhere — into ISAs, pension contributions, or debt repayment — might deliver a better outcome than paying down your student loan early. The IFS has consistently found that under Plan 2, roughly 75% of borrowers will not repay their loan in full before write-off. Under Plan 5, with its 40-year term and larger initial balances (tuition fees rose to up to £9,535 per year from 2025), the proportion who reach the write-off date with a remaining balance is projected to be even higher. --- ## Practical Steps to Take Right Now Whether you are on Plan 2 or Plan 5, there are several actions worth taking before the end of the 2025–26 tax year: **1. Confirm your plan type.** Log into your Student Loans Company account at studentloans.co.uk or check your payslip, which will state the deduction category. Misidentified plan types are more common than you might expect, particularly for graduates who began repaying under PAYE many years ago. **2. Check your outstanding balance.** Your SLC online account shows your current balance, annual statement, and projected repayment date. Reviewing this once a year takes minutes and can inform larger financial decisions. **3. Model your lifetime repayments.** MoneySavingExpert's student loan calculator remains one of the best free tools for projecting whether you are likely to repay in full. If you are clearly not going to clear the balance — as most graduates on Plan 2 will not — this changes the strategic calculus around overpayments entirely. **4. Speak to a financial adviser before making lump-sum payments.** If you have come into an inheritance or a bonus and are tempted to use it to clear student debt, take independent advice first. The opportunity cost of directing a lump sum at a loan that would otherwise be written off can be substantial. **5. Update your income details if circumstances change.** Self-employed graduates in particular should ensure their Self Assessment returns accurately reflect income, as underpayments can result in unexpected demands from HMRC. UK student loan repayment in 2026 rewards those who understand the rules. The system is deliberately designed to be income-contingent and forgiving — lean into that design rather than fighting it with overpayments that may never benefit you. ## Frequently asked questions ### What is the repayment threshold for Plan 2 in 2026? The Plan 2 repayment threshold for the 2025–26 tax year remains frozen at £27,295. You repay 9% of everything you earn above this figure. For example, if you earn £35,000, you repay 9% of £7,705, which works out at roughly £693 per year or about £58 per month. ### What is the repayment threshold for Plan 5 in 2026? Plan 5 applies to students who started undergraduate courses in England from August 2023 onwards. The repayment threshold is £25,000, also charged at 9% of earnings above that level. While the threshold is lower than Plan 2, interest is charged only at RPI rather than RPI plus up to 3%, which can offset the cost over time. ### When is my student loan written off? For Plan 2 borrowers the loan is written off 30 years after the April following your first repayment. For Plan 5 borrowers the write-off period is 40 years. This extended timeline is one of the reasons financial analysts often caution graduates to weigh the write-off date carefully before making voluntary overpayments. ### Should I overpay my student loan to clear it faster? For most graduates the honest answer is no. Because student loans are income-contingent and carry a write-off date, many borrowers will never repay the full balance — so every pound overpaid is a pound that could have been invested or used to pay off higher-rate consumer debt. Overpaying makes sense only if your projected lifetime repayments clearly exceed the total balance, which typically applies to very high earners with relatively modest outstanding debt. ## Sources - [Student loan repayment thresholds and rates — GOV.UK](https://www.gov.uk/repaying-your-student-loan/what-you-pay) - [Student Loans Company — repayment information](https://www.slc.co.uk/students-and-customers/loan-repayment.aspx) - [Institute for Fiscal Studies — Higher Education Finance Reform](https://ifs.org.uk/education/higher-education) - [MoneySavingExpert — Student Loan Mythbusting](https://www.moneysavingexpert.com/students/student-loans-myths/) - [Office for Students — Tuition fees and student finance](https://www.officeforstudents.org.uk/advice-and-guidance/student-wellbeing-and-protection/student-finance/) --- Daily Junction — https://dailyjunction.org/business-finance/uk-student-loan-repayment-2026