Student loan repayments in the UK explained in plain English

Many people worry about student loans but are not sure whether they work like normal debt or more like a tax. The answer is somewhere in between. Your income matters more than the size of your balance, and the rules depend on which repayment plan you are on.

This guide focuses on how repayments work day to day, not whether university is worth the cost or whether you should pay off a loan early.

The basics in one place

In the UK there are several main student loan repayment plans that use income based repayments:

• Plan 1
• Plan 2
• Plan 4 (Scotland)
• Plan 5 (new style loans for many students in England from 2023 onwards)
• Postgraduate loan plan

For Plans 1, 2, 4 and 5 you repay 9 percent of your income over the relevant threshold. For postgraduate loans you repay 6 percent of income over the postgraduate threshold. This is set out clearly on GOV.UK in the section on how much you repay: https://www.gov.uk/repaying-your-student-loan/what-you-pay

MoneyHelper, the government backed money guidance service, also explains that repayments normally come straight out of your pay if you are employed, alongside tax and National Insurance: https://www.moneyhelper.org.uk/en/family-and-care/student-and-graduate-money/how-to-deal-with-debts-after-graduation-from-university

How much do I have to earn before I repay?

The thresholds are reviewed each tax year. For the 2025 to 2026 tax year payroll and tax specialists list the following thresholds, which match guidance used by employers:

• Plan 1: 26,065 pounds a year
• Plan 2: 28,470 pounds a year
• Plan 4: 32,745 pounds a year
• Postgraduate loan: 21,000 pounds a year

Sources include payroll briefings from Cintra and other providers that summarise the official thresholds used by employers: https://cintra.co.uk/blog/student-loan-repayments-25-26/ https://merrantiaccounting.com/new-student-loan-repayment-thresholds-for-2025-26/

For Plan 5 loans, which apply to many new English borrowers, the salary threshold is 25,000 pounds. The House of Commons Library confirms that Plan 5 has a 25,000 pound threshold and a 40 year repayment period: https://commonslibrary.parliament.uk/student-loans-and-interest-rates-faqs/

The GOV.UK student loan terms and conditions for 2025 to 2026 also explain that the Plan 5 repayment threshold for the 2026 to 2027 tax year will be 25,000 pounds a year, and that if income falls below the threshold, repayments stop: https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2025-to-2026

How are repayments worked out in practice?

You repay a percentage of income above the threshold for your plan. The GOV.UK examples show the calculation in simple steps: https://www.gov.uk/repaying-your-student-loan/what-you-pay

A simple example for Plan 2:

• your salary is 30,000 pounds a year
• the Plan 2 threshold is 28,470 pounds
• the amount above the threshold is 1,530 pounds
• 9 percent of 1,530 is 137.70 pounds a year, or about 11 pounds 50 a month

If you earn less than the threshold in a given pay period you do not repay through PAYE for that period.

If you have more than one loan type, GOV.UK explains that you still have one combined deduction through payroll, based on the lowest threshold that applies to you: https://www.gov.uk/repaying-your-student-loan/what-you-pay

What if I am self employed or have more than one job?

MoneyHelper explains that:

• if you are employed, repayments are usually taken automatically by your employer through PAYE
• if you are self employed, or have other income that needs a Self Assessment return, HM Revenue and Customs will work out student loan repayments as part of your tax bill

Guidance is available here: https://www.moneyhelper.org.uk/en/family-and-care/student-and-graduate-money/how-to-deal-with-debts-after-graduation-from-university and on GOV.UK: https://www.gov.uk/repaying-your-student-loan/how-to-repay

If you have two jobs, each employer uses your plan type and the thresholds and may deduct repayments from both wages if each income on its own is above the threshold.

Does my student loan show on my credit report?

Student loans are handled differently from normal consumer credit. The Week and other financial journalism sources explain that in the UK student loan balances are not recorded on standard credit files in the same way as credit cards or personal loans: https://theweek.com/personal-finance/how-student-loans-work-and-when-you-need-to-repay-them

That means lenders will not see a student loan balance listed like other debts when they check your credit report, although they may still take account of the impact repayments have on your disposable income when they underwrite a mortgage or other borrowing.

What happens if I move overseas?

If you leave the UK for more than three months you must tell the Student Loans Company and complete an overseas income assessment form. GOV.UK explains that:

• you still have to make repayments if your overseas income is above the relevant threshold
• if you do not provide income information, the Student Loans Company can charge a fixed monthly repayment amount

Guidance for overseas thresholds is published separately for each plan: Plan 2: https://www.gov.uk/government/publications/overseas-earnings-thresholds-for-plan-2-student-loans Plan 5: https://www.gov.uk/government/publications/overseas-earnings-thresholds-for-plan-5-student-loans

The thresholds are adjusted using a price level index to reflect local living costs in different countries, so they are not always the same as the UK threshold.

When is a student loan written off?

The write off rules depend on which plan you are on and where you studied.

The House of Commons Library summarises key terms as:

• Plan 2 loans are normally written off 30 years after the April when you first became liable to repay
• Plan 5 loans have a 40 year write off period
• different write off rules apply to Plan 1 and Plan 4

See the Commons Library student loans and interest rates FAQs: https://commonslibrary.parliament.uk/student-loans-and-interest-rates-faqs/

GOV.UK also has a section on when a loan is cancelled, including for age, time and if a borrower dies or is permanently unable to work: https://www.gov.uk/repaying-your-student-loan/when-your-student-loan-gets-written-off-or-cancelled

What if I lose my job or my income drops?

Student loans are designed so that repayments adjust automatically when income changes.

GOV.UK states that you only repay when your income is above the threshold for your plan, and that if your income falls below the threshold your repayments stop until you are above the threshold again: https://www.gov.uk/repaying-your-student-loan/when-you-start-repaying

If you lose your job or your hours are cut and you are on PAYE, deductions from your wages should reduce or stop automatically. If you are self employed you may need to update your Self Assessment and tell the Student Loans Company if your income changes significantly between tax returns.

Can I get a refund if too much has been taken?

Yes. If your employer has started taking student loan repayments before you were due to repay, or if deductions continue after you have repaid in full, you can claim a refund.

GOV.UK explains that you should keep payslips and P60s and that you can request a refund from the Student Loans Company if too much has been collected: https://www.gov.uk/repaying-your-student-loan/getting-a-refund

How does this all affect everyday budgeting?

A few practical points for planning:

• treat student loan repayments as part of the tax system rather than as a separate credit bill
• check which plan you are on and what threshold applies so that you are not surprised when deductions start
• if your pay fluctuates, remember that repayments may be higher in good months and fall back in quieter months
• if you are thinking about a mortgage, use lender or independent calculators that include student loan deductions so that you see a realistic picture of how much you can borrow

Free and impartial help is available from MoneyHelper if you are worried about debt or juggling several payments: https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt/dealing-with-debt

Student loans are complex, but the core idea is simple. You contribute a fixed share of income above a threshold for a set period, and what you pay overall depends more on your earnings than on the headline balance on your statement.