Student Loan Plan 5: New Repayment Rules for English Undergraduates from August 2023

The plan that applies to you depends on when you started your course and where you lived when you applied. The main UK plans are:

• Plan 1 — for English and Welsh students who started a course before 1 September 2012, and for Northern Irish students. Threshold £24,990 from April 2024.
• Plan 2 — for English and Welsh students who started a course between 1 September 2012 and 31 July 2023. Threshold £27,295 from April 2024.
• Plan 4 — for Scottish students. Threshold £31,395 from April 2024. Administered by Student Awards Agency for Scotland (SAAS).
• Plan 5 — for English students who started a course on or after 1 August 2023. Threshold £25,000.
• Postgraduate Loan — for English Master's loans (from 2016) and Doctoral loans (from 2018). Threshold £21,000.

If you have more than one plan, repayments are deducted in parallel. For example, an English graduate who did an undergraduate degree in 2022 and a Master's in 2024 would have a Plan 2 undergraduate loan, a Postgraduate Loan, and possibly Plan 5 if they later started another undergraduate course in 2023+. PAYE software handles the simultaneous deduction.

Plan 5 repayments are made through PAYE if you are employed, or through Self-Assessment if you are self-employed. The rate is 9% of income above £25,000 per year (£2,083 per month, £481 per week). Below the threshold no repayment is due — even if your loan balance is enormous.

Worked examples (rough — actual deductions depend on the exact pay period and codes):

• Salary £25,000: repayment = 0.
• Salary £30,000: above threshold by £5,000. Annual repayment = £5,000 × 9% = £450 (about £37/month).
• Salary £40,000: above threshold by £15,000. Annual repayment = £15,000 × 9% = £1,350 (about £112/month).
• Salary £60,000: above threshold by £35,000. Annual repayment = £35,000 × 9% = £3,150 (about £262/month).

"Income" for repayment includes employment income, self-employment profit, and unearned income above £2,000 in the tax year — but does not include savings interest below the personal savings allowance or ISA returns. Maintenance loans and grants do not count.

Crucially, Plan 5 repayments start in the April after you become eligible to repay (the April after you finish or leave your course). The 40-year write-off clock runs from the April you become eligible — so most graduates will see their balance written off at age 65 even if they have repaid significant amounts.

The biggest change in Plan 5 is the interest cap. Under Plan 2 the interest rate was RPI + up to 3% depending on income — meaning many graduates saw the balance grow faster than they repaid even while making substantial repayments. Under Plan 5 the rate is capped at the retail prices index (RPI), meaning the loan grows only in line with inflation. There is no real-terms growth.

This makes Plan 5 effectively an inflation-protected loan that the Treasury — not the borrower — bears the inflation risk on. For most graduates the practical effect is:

• The nominal balance still grows each year (in line with RPI), so a £45,000 starting balance can look like £80,000+ after 20 years.
• But the real-terms value is unchanged. A £45,000 balance today is worth ~£45,000 in today's money throughout the loan term.
• For modest earners, the balance will not be cleared within 40 years and the remaining amount is written off.
• For high earners (those earning a sustained £60,000+ throughout their career), the loan may be repaid before 40 years.

Plan 2 also has a more complex interest rule: rate varies with income, ranges from RPI to RPI+3%. Some high-earning Plan 2 borrowers benefit from making voluntary overpayments to limit the interest accrual. Plan 5 borrowers usually do not — see below.

You can make voluntary overpayments to the Student Loans Company at any time. The question is whether you should.

The short answer for Plan 5 is: only if you are confident you will pay it off in full within 40 years. Otherwise overpaying gives the government money you would never have paid because the balance would have been written off anyway.

Practical test:

1. Calculate your current outstanding balance × 1.04 (rough average annual RPI).
2. Compare to your projected lifetime repayments based on your expected income trajectory at 9% above £25,000.
3. If lifetime repayments exceed the balance × inflation, you will pay it off — overpayment may save interest. If lifetime repayments fall short, the balance will be written off — overpayment is wasted money.

For most Plan 5 graduates earning between £25,000 and £45,000, the loan will not be repaid in full and overpayment does not pay off financially. For very high earners (especially in finance, law, medicine), overpayment can save money. Use the official Student Loans Company repayment estimator before deciding. Get free advice from MoneyHelper.

Practical management points:

• Check your balance via the Student Loans Company portal. Register at manage your student loan. Balances are updated annually.
• Tell SLC if you go abroad for more than 3 months. Failing to do so can trigger penalty charges and inflated overseas income assumptions. The Overseas Income Assessment form should be submitted each year you are abroad.
• Self-assessment makes a difference. Repayments are calculated on your total tax-year income, not just employment. Submitting an accurate Self Assessment in any year you have self-employment income matters.
• Repayments do not affect your credit file. Student loans are not reported to credit reference agencies (Experian, Equifax) and do not appear in credit scores or mortgage affordability assessments. Lenders do see the deduction from your monthly take-home pay in affordability calculations.
• Income changes mid-year. PAYE adjusts repayments automatically. Self-Assessment reconciles at year-end.
• If you stop working, no repayment is due. Repayments resume when income rises above the threshold again.