Student Loan Repayment Calculator (Plan 2 & Plan 5)

Student Loan Guide

How UK Student Loans Work?

UK student loans are income-contingent — you only repay if you earn above the threshold. Plan 2 (2012-2022 starters): repayment threshold: £27,295/year (2026/27). Repayment rate: 9% of income above threshold. Interest rate: RPI + 0-3% (currently 7.3%). Write-off: after 30 years from April after graduation. Plan 5 (2023+ starters): threshold: £25,000/year. Repayment rate: 9% above threshold. Interest rate: RPI only (lower than Plan 2). Write-off: after 40 years. Plan 1 (pre-2012): threshold: £22,015, with a lower repayment threshold reflecting the older, smaller loan balances typical of this cohort.

What do I need to know about Monthly Repayment Calculation?

Monthly repayment = 9% × (annual salary − threshold) / 12. Plan 2, salary £35,000: (£35,000 − £27,295) × 9% / 12 = £7,705 × 0.09 / 12 = £57.79/month. Plan 5, same salary: (£35,000 − £25,000) × 9% / 12 = £75/month. Repayments go to HMRC via PAYE (deducted from payslip automatically for employed) or via self-assessment for self-employed. Zero repayment if salary below threshold — no repayments required, balance increases with interest.

Will You Repay in Full?

The critical question: will you repay the full balance in 30 (Plan 2) or 40 (Plan 5) years? If yes: treat it as a real loan — making overpayments reduces interest. If no (most people): the write-off after 30-40 years means the marginal extra pound you repay saves no money in the long run — because you will not repay in full regardless. Estimate: £50,000 balance at 7.3% interest. At £35,000 starting salary growing at 3%/year: repayments in year 1: £693. Interest in year 1: £3,650. Balance INCREASES in the early years, since interest accrues faster than the modest repayments reduce it — a completely normal pattern for most graduates rather than a sign anything has gone wrong.

What do I need to know about The Graduate Tax Framing?

The most financially rational way to view a UK student loan (Plan 2/5): NOT as a debt to be repaid as quickly as possible. Rather as an additional 9% income tax rate above the threshold. Overpaying voluntary amounts is usually NOT recommended because: if you will not repay in full anyway, overpaying is throwing money away. The loan is written off regardless. Higher-income graduates who will repay in full: overpaying makes financial sense if the interest rate exceeds your savings rate. Test: if you expect to clear the balance well before the 40-year write-off point, treating it as a conventional debt and considering overpayment makes more sense than if you expect it to be written off regardless.

Which Repayment Plan Are You On, and Why It Changes Everything

Not all UK student loans work the same way, and which repayment plan you're on determines your threshold, interest rate, and write-off period. Plan 1 covers most English and Welsh students who started before 2012, plus some Northern Ireland borrowers, with a lower repayment threshold and interest typically pegged to a lower base rate. Plan 2 covers English and Welsh undergraduates from 2012 to 2023, with a higher threshold and interest that scales with income up to RPI plus a margin while studying and shortly after. Plan 4 applies to Scottish students, with its own threshold set by the Scottish Government. Plan 5 applies to English and Welsh students starting from 2023 onwards, with a lower threshold than Plan 2 and a longer write-off period, generally 40 years rather than 30. Postgraduate loans run as a separate, additional plan with their own lower threshold and rate, calculated independently of any undergraduate plan. Because the calculator needs to know which plan applies, checking your plan type, shown on your student finance account, before comparing repayment projections matters: the wrong plan assumption can make a working estimate of your monthly deduction, total interest, and years to clear the debt meaningfully inaccurate.

Does a Student Loan Show Up on Mortgage Affordability Checks?

A student loan doesn't appear on your credit report and doesn't affect your credit score, but it still shapes how much a mortgage lender will offer. Lenders calculate affordability based on net income after essential deductions, and the monthly student loan repayment taken straight from your payslip reduces that net figure just like tax or pension contributions. A borrower with a large student loan deduction and otherwise identical income to someone without one will typically be offered a smaller mortgage, because the lender's affordability model treats the deduction as money unavailable for mortgage payments. This matters particularly for higher earners on Plan 2 or Plan 5, where the 9% marginal deduction above the threshold can be a noticeable chunk of monthly take-home pay. It also means that paying off a student loan early, where it genuinely clears the balance, can increase borrowing capacity by freeing up that monthly amount, though for most graduates the loan will outlast any realistic early-repayment plan, so the more common scenario lenders see is simply factoring the ongoing deduction into the affordability sum rather than it disappearing.

Worked Example: Monthly Repayment on a £35,000 Salary (Plan 2)

Plan 2 repayments are 9% of income above the repayment threshold, currently around £27,295 a year for most recent tax years (thresholds are reviewed periodically, so check gov.uk for the exact current figure). For a salary of £35,000: income above the threshold = £35,000 − £27,295 = £7,705. Annual repayment = £7,705 × 0.09 = £693.45. Dividing by 12 gives a monthly repayment of about £57.79 — deducted automatically through PAYE, the same way income tax and National Insurance are. If that same graduate gets a pay rise to £40,000, the repayment recalculates as (£40,000 − £27,295) × 0.09 = £12,705 × 0.09 = £1,143.45 a year, or £95.29 a month — repayments scale directly with income above the threshold, not with the loan balance.

Because repayments are based purely on income rather than the amount borrowed, two graduates earning the same salary make identical monthly repayments regardless of whether one borrowed £30,000 and the other £60,000 — the difference only shows up in whether the loan is fully repaid before being written off.

What Happens to the Loan If You Never Clear It

UK student loans aren't like a conventional debt — if the balance (including accrued interest) isn't fully repaid by the end of the write-off period (30 years after the April you were first due to repay, for most Plan 2 borrowers), the remaining balance is wiped completely, with no further liability to the borrower or their estate. This is why financial advisers generally treat student loan repayments as a tax-like deduction from income rather than a debt to aggressively overpay, unless you're confident you'll clear the balance well before the write-off date anyway — overpaying a loan you were always going to have written off simply hands money to the government early for no benefit.

What Counts as Income for Repayment Purposes

Student loan repayments are calculated on gross income above the relevant threshold, not take-home pay, and for employees this is handled automatically through PAYE in much the same way as Income Tax and National Insurance. For the self-employed, repayments are instead calculated through Self Assessment based on profits, which can create a cash-flow mismatch if income varies significantly during the year, since the repayment due is only finalised once the tax return is filed. Some income, such as most pension contributions made via salary sacrifice, is excluded from the repayment calculation in the same way it reduces taxable income, which is one of several reasons increasing pension contributions can lower a student loan repayment alongside its tax benefits.

How Overpaying Voluntarily Can Cost You Money Under Plan 2/5

Because student loans under plans like Plan 2 and Plan 5 are written off after a set number of years regardless of how much remains outstanding, voluntarily overpaying only makes financial sense if you're confident you'll clear the full balance comfortably before that write-off date — otherwise, extra payments can simply reduce a balance that would have been wiped out anyway, effectively throwing money away. This is quite different from a typical personal loan or mortgage, where every extra payment reliably reduces what you'll ultimately pay. Anyone considering overpaying should first estimate, even roughly, whether they're on track to repay in full within the term; if the projection shows the loan being written off with a balance still owing, the standard repayment rate alongside other saving or investing options is usually the better use of extra cash.