Plan 5 Student Loan Repayments Are Now Live — How the £25,000 Threshold Affects Your Payslip

The 2026/27 tax year marks the first year that graduates on Plan 5 student loans have started seeing deductions taken from their payslips through PAYE, with repayments set at 9% of earnings above £25,000 a year (£2,083 a month or £480 a week). Because the Plan 5 threshold is lower than older Plan 1 and Plan 2 loans, recent graduates start repaying significantly earlier in their careers.

Every 2026/27 Student Loan threshold compared

Which plan you are on depends on where you lived when you applied and when you started your course. For the 2026/27 tax year (6 April 2026 to 5 April 2027), the annual thresholds are:

• Plan 1 (pre-September 2012 England/Wales, or Northern Ireland): £26,900 (repaying 9% above this; confirmed to rise to £28,005 from 6 April 2027).
• Plan 2 (September 2012 to July 2023 England/Wales): £29,385 (repaying 9% above this).
• Plan 4 (Scotland): £33,795 (repaying 9% above this).
• Plan 5 (courses started from August 2023 in England): £25,000 (repaying 9% above this; first PAYE deductions started 6 April 2026, and 6 April 2027 for Self Assessment).
• Postgraduate Loan (Master's or Doctoral in England/Wales): £21,000 (repaying 6% above this).

If you hold both an undergraduate loan and a Postgraduate Loan, the deductions are not combined into a single cap — you repay 6% above £21,000 and 9% above your undergraduate threshold at the same time, creating a 15% combined marginal deduction once your salary crosses both thresholds.

How the 4.1% RPI interest rate works from September 2026

Student loan interest rates reset every academic year on 1 September based on the prior March Retail Prices Index (RPI), which stands at 4.1% for 1 September 2026 to 31 August 2027:

• Plan 5, Plan 4, and Plan 1: Charged at flat RPI (4.1%), meaning your balance grows solely in line with inflation rather than adding a real-terms interest mark-up.
• Plan 2: Charged at 4.1% while earning £29,385 or less, rising on a sliding scale up to RPI + 3% (7.1%, currently capped at 6.0%) once income reaches £52,885.

Checklist: checking your payslip and claiming bonus refunds

• Check which Plan type is printed on your payslip — an incorrect starter checklist tick-box can put a Plan 2 graduate onto Plan 1 or Plan 5, costing up to £394 a year in extra deductions.
• Remember PAYE calculates student loan deductions per pay period (monthly or weekly), not annually — if an annual bonus or overtime month pushes your pay above £2,083 (Plan 5) or £2,448.75 (Plan 2) in a single month, your employer will deduct 9%, even if your total income for the full tax year ends up below the annual threshold.
• If you paid student loan deductions during a bonus month or part-year job but earned less than your annual threshold over the whole tax year, request a refund directly from the Student Loans Company after 5 April.

How the UK compares internationally

Income-contingent student loans are a hallmark of the UK and Australian higher education systems. In Australia, HELP student loans are also repaid as a percentage of income above a minimum threshold and indexed to inflation, whereas standard federal student loans in the United States default to fixed monthly amortisation schedules unless a borrower actively enrolls in an Income-Driven Repayment (IDR) plan.

Key Numbers

• Plan 5 repayment threshold (2026/27): £25,000 a year / 9% above threshold
• Plan 2 vs Plan 1 thresholds (2026/27): £29,385 (Plan 2) and £26,900 (Plan 1)
• Postgraduate Loan threshold (2026/27): £21,000 a year / 6% above threshold
• Applicable RPI interest rate (1 Sep 2026 – 31 Aug 2027): 4.1%

Sources

• Student Loans 2026/27 thresholds and rates — RossMartin
• Student Loan Plans 2026/27: Thresholds and Rates — Acumon
• Student loan repayments — Low Incomes Tax Reform Group (LITRG)
• StudyAssist — Australian Government HELP loan repayments

Educational content only — not financial advice.