Student Loan Repayment in the UK: The Complete Guide

Understanding your student loan repayment is one of the most important financial decisions you'll make after graduating. With five different repayment plans, changing thresholds and complex interest rates, it's easy to feel overwhelmed. This guide breaks down everything you need to know for the 2026/27 tax year.

Which Student Loan Plan Am I On?

The UK has five different student loan repayment plans. Your plan depends on when you started your course and where you studied. Getting this right is essential — each plan has different repayment thresholds and interest rates.

Important: You can be on more than one plan simultaneously. For example, if you have an undergraduate Plan 2 loan and a separate Master's loan, you'll make two separate repayments — 9% above £27,295 for Plan 2, plus 6% above £21,000 for the postgraduate loan.

Repayment Thresholds for 2026/27

You only start repaying your student loan once your income exceeds your plan's threshold. The threshold is calculated before tax but after certain deductions like pension contributions.

For employed workers, repayments are taken automatically through PAYE alongside your Income Tax and National Insurance. Your employer deducts the amount and pays it directly to HMRC, who pass it to the Student Loans Company (SLC).

For self-employed workers, student loan repayments are calculated through your Self Assessment tax return and paid in one lump sum by 31 January each year. Use our Student Loan Calculator to estimate your annual self-employed repayment.

How Much Will I Pay Each Month?

Your monthly repayment is calculated as a percentage of your income above the threshold, divided by 12. Here are examples for each plan at different income levels:

Remember: if you have both an undergraduate and postgraduate loan, you pay both simultaneously. For example, on Plan 2 plus Postgraduate earning £35,000, you'd pay £57.79 + £70.00 = £127.79 per month total.

Interest Rates by Plan (2026)

Student loan interest rates are reviewed annually and applied from 1 September each year. The rate you pay depends on your plan and your income.

For Plan 2 and Plan 4, the sliding scale works as follows: if you earn below the repayment threshold, you pay RPI only (effectively 0% in real terms). If you earn above £49,130, you pay RPI + 3%. Between the threshold and £49,130, the rate increases gradually on a sliding scale.

When Do Student Loans Get Written Off?

One of the most important features of UK student loans is that they are automatically written off after a set period — regardless of how much remains. Any outstanding balance is cancelled and does not affect your credit score.

Plan 5 note: The 40-year write-off period is significantly longer than other plans. This means Plan 5 borrowers are more likely to repay their full loan, making overpayment decisions different from Plan 2 borrowers.

Student Loans If You Move Abroad

If you move outside the UK for more than 3 months, you must inform the Student Loans Company. You will still be required to make repayments based on your overseas income. The SLC uses fixed overseas repayment thresholds that vary by country.

Failure to report your overseas income can result in penalties and default interest of up to RPI + 3% being applied to your entire balance. The SLC actively cross-references with HMRC and foreign tax authorities to track down non-payers.

Do Student Loans Affect Mortgages?

Yes — but not as dramatically as many people think. Student loans reduce your net take-home pay, which mortgage lenders consider when calculating affordability. However, student loans do not appear on your credit file and are not treated like commercial debt.

Most lenders will reduce your maximum borrowing by roughly 3-4 times your annual student loan repayment. For example, if you pay £720 per year (£60/month) in student loans, your mortgage capacity may be reduced by approximately £2,000-£3,000 — not enough to make a meaningful difference for most buyers.

Should I Overpay My Student Loan?

For most borrowers, overpaying is not financially worthwhile. Unlike commercial loans, UK student loans:

• Are written off after 25-40 years (any unpaid balance is cancelled)
• Have interest rates typically below commercial borrowing rates
• Do not affect your credit score
• Are paused if your income drops below the threshold
• Are written off on death (not passed to your estate)

When overpaying makes sense: Only if you are a high earner who will definitely clear the balance before the write-off date. For example, a Plan 2 borrower earning £60,000+ will likely repay their full loan within 15-20 years, so overpaying could save interest.

Use our Student Loan Repayment Calculator to see your estimated payoff date and total interest before deciding.

Frequently Asked Questions