Student Loan Repayment Guide 2025-26: Complete Plan Overview
Understand how student loan repayments work in the UK for 2025-26. Complete coverage of Plan 1, Plan 2, Plan 4, Plan 5, and Postgraduate loans including thresholds, rates, and write-off periods.
2025-26 Student Loan Quick Reference
Repayment Thresholds:
- • Plan 1: £22,015 annually
- • Plan 2: £27,295 annually
- • Plan 4: £31,395 annually
- • Plan 5: £25,000 annually
- • Postgraduate: £21,000 annually
Write-off Periods:
- • Plan 1: 25 years (or age 65)
- • Plan 2: 30 years
- • Plan 4: 25 years
- • Plan 5: 40 years
- • Postgraduate: 30 years
Understanding Your Student Loan Plan Type
Your student loan plan depends on when and where you studied. Each plan has different repayment thresholds, interest rates, and write-off periods. Understanding which plan you're on is crucial for financial planning and understanding when you'll be debt-free.
Pre-2012 Students
Applies to students in England and Wales who started undergraduate courses before 1 September 2012, or Scottish and Northern Irish students who started before 1 September 1998.
2012-2023 Students
Applies to students in England and Wales who started undergraduate courses between 1 September 2012 and 31 August 2023.
Scottish Students
Applies to Scottish students who started undergraduate courses from 1 September 1998 onwards.
2023+ Students
Applies to students in England who started undergraduate courses from 1 September 2023 onwards.
Postgraduate Loans
Important: Postgraduate loan repayments are in addition to undergraduate loan repayments. If you have both, you'll pay both rates simultaneously once you're above both thresholds.
How Student Loan Repayments Work
Student loan repayments are automatically deducted from your salary through PAYE, similar to Income Tax and National Insurance. You only start repaying once your income exceeds the repayment threshold for your plan type.
Monthly Repayment Examples (2025-26)
Plan 2: £35,000 salary
Plan 2: £50,000 salary
Plan 1: £35,000 salary
Interest Rates and Loan Write-off
Interest is charged on your loan from the day you receive your first payment until it's fully repaid or written off. The interest rate varies by plan type and, for some plans, by your income level during repayment.
Interest Rate Structure
- Plan 1 & 4: RPI + 0-1% (lower rates)
- Plan 2: RPI + 0-3% (income-linked)
- Plan 5: RPI + 0% (inflation only)
- Postgraduate: RPI + 3% (highest rate)
RPI = Retail Price Index (inflation measure)
Loan Write-off Benefits
- Automatic: No action required
- Tax-free: Written-off amount isn't taxable
- Credit score: No negative impact
- Peace of mind: Debt doesn't last forever
Most borrowers won't repay their loans in full
Impact on Your Take-Home Pay
Student loan repayments are deducted after Income Tax and National Insurance, creating an additional effective tax rate. Understanding this helps with salary negotiations and financial planning.
Effective Marginal Tax Rates with Student Loans
Basic Rate Taxpayer with Plan 2 Loan:
- • Income Tax: 20%
- • National Insurance: 12%
- • Student Loan: 9%
- • Total marginal rate: 41%
Higher Rate Taxpayer with Plan 2 Loan:
- • Income Tax: 40%
- • National Insurance: 2%
- • Student Loan: 9%
- • Total marginal rate: 51%
This means for every extra £100 you earn, you keep only £59 (basic rate) or £49 (higher rate).
Salary Sacrifice and Student Loans
Salary sacrifice arrangements (like pension contributions) reduce your gross pay before student loan calculations, providing additional value for those with student loans.
Example: £1,000 Pension Contribution
Effective return: 41% tax relief on pension contributions
Other Salary Sacrifice Options
- • Childcare vouchers: Save on nursery costs
- • Cycle to work: Tax-free bike purchases
- • Electric cars: Company car benefits
- • Additional pension: Boost retirement savings
All salary sacrifice schemes reduce student loan repayments
Should You Pay Off Your Student Loan Early?
This is one of the most common questions about student loans. The answer depends on your loan plan, current and expected future income, and other financial priorities.
Consider Paying Off If:
- • High current earnings (£60,000+)
- • Plan 2 loan with high interest
- • Stable, increasing income trajectory
- • Low risk tolerance
- • Psychological benefit of being debt-free
- • Limited other investment options
Probably Don't Pay Off If:
- • Plan 1, 4, or 5 loan
- • Income below £40,000
- • Career early stage with uncertainty
- • Other high-interest debt exists
- • Strong investment opportunities available
- • Need emergency fund building
Seek Advice If:
- • Income fluctuates significantly
- • Planning career break/change
- • Multiple loan types
- • Significant other investments
- • Complex tax situation
- • Nearing write-off period
Key Financial Considerations
Arguments for Early Repayment:
- • Guaranteed "return" equal to interest rate
- • Reduces future monthly payments
- • Interest savings can be substantial
- • Psychological benefits of being debt-free
- • Simplifies financial planning
Arguments for Minimum Payments:
- • Many loans will be written off
- • Investment returns may exceed loan interest
- • Maintains liquidity for opportunities
- • Income may decrease in future
- • Inflation reduces real debt burden
Calculate Your Student Loan Repayments
Use our comprehensive calculator to see exactly how much you'll pay based on your salary, loan plan, and personal circumstances.
Related Tax Guides
Workplace Pensions
Learn how pension contributions can reduce your student loan repayments through salary sacrifice.
2025-26 Tax Year Overview
Complete guide to all UK tax changes for 2025-26 including rates and thresholds.
National Insurance Guide
Understand how National Insurance interacts with student loan repayments.