Plan 1 vs Plan 2
Plan 1 (pre-2012 starters) and Plan 2 (2012–2023 starters in England and Wales) have different thresholds, interest rates, and write-off periods. Here is what changes between them and what it means for monthly payments.
Plan 1 Threshold
£26,900
£2,241/month
Plan 2 Threshold
£29,385
£2,448/month (higher)
Write-off Difference
5 years
P1: 25y, P2: 30y
Interest Advantage
Plan 1
Capped interest vs RPI+3%
ℹ️Which plan do you have?
Plan 1: If you started your undergraduate course in England or Wales before September 2012, or if you studied in Scotland or Northern Ireland (any date).
Plan 2: If you started your undergraduate course in England or Wales between September 2012 and July 2023.
Check your Student Loans Company account if you're unsure which plan you're on.
Comparison
| Feature | Plan 1 | Plan 2 |
|---|---|---|
| Annual Threshold | £26,900 | £29,385 |
| Monthly Threshold | £2,241 | £2,448 |
| Repayment Rate | 9% | 9% |
| Interest Rate | Lower of RPI or Base +1% | RPI to RPI+3% (sliding scale) |
| Current Interest (approx) | ≈3.2% | ≈3.2-6.2% |
| Write-off Period | 25 years | 30 years |
| While Studying Interest | RPI or Base +1% | RPI + 3% |
| High Earner Interest (£52k+) | ≈3.2-4.5% | RPI + 3% (≈6.2%) |
Interest Rates: The Critical Difference
The interest rate mechanism is where Plan 1 and Plan 2 differ most significantly. Plan 1 protects borrowers from excessive interest, while Plan 2 can penalize high earners heavily.
💰Plan 1 Interest: Capped & Predictable
Formula: Lower of RPI or Bank of England base rate + 1%
Current rate: ≈3.2%
Key benefit: Interest never exceeds a reasonable cap, regardless of your income
The Advantage: Even if you earn £100k/year, your interest rate stays around 3-4%, making the loan much more manageable for high earners.
⚡Plan 2 Interest: Income-Linked & Complex
While studying: RPI + 3% (≈6.2%)
Below threshold (under £29,385): RPI only (≈3.2%)
Sliding scale (£29,385 - £52,195): Gradually increases from RPI to RPI + 3%
High earners (£52,195+): RPI + 3% (≈6.2%)
The Problem: High earners can see their balance grow despite making monthly payments, as 6.2% interest outpaces repayments.
Repayment Thresholds: Plan 2 Has Higher Protection
Plan 2's threshold is £2,485 higher than Plan 1, meaning Plan 2 borrowers have more protection at lower salaries.
📝 Example: £27,000 Salary
Plan 1:
Above threshold by £100
Monthly: £1/month
Plan 2:
Below threshold - £0 repayment
Advantage:
Plan 2 has £1/month more take-home
📝 Example: £50,000 Salary
Plan 1:
Monthly: £173/month
Interest: ≈3.2%
Plan 2:
Monthly: £155/month
Interest: ≈5.0% (sliding scale)
Note:
Similar monthly payments, but Plan 2's higher interest means slower balance reduction
Try it yourself. See how Plan 1 vs Plan 2 affects your actual repayments.
Open Calculator →Write-off Periods: 25 vs 30 Years
Plan 1 loans are written off after 25 years, while Plan 2 extends this to 30 years. This 5-year difference can significantly impact total repayment.
Plan 1: 25 Years
- Shorter repayment window
- Written off April after 25 years from graduation
- For some older loans, write-off at age 65
- Higher likelihood of reaching write-off
Plan 2: 30 Years
- Extra 5 years of potential payments
- Written off April after 30 years from graduation
- Approximately 80% still reach write-off
- Extra years balance out higher threshold
Real-World Scenarios: Which Plan Costs More?
💰Scenario 1: Average Earner (£25k → £38k career)
Starting debt: £40,000
Plan 1:
- Consistent small payments throughout career
- Lower interest keeps balance growth minimal
- Likely hits 25-year write-off
- Total paid: ≈£15,000-£20,000
Plan 2:
- Lower payments early (higher threshold)
- RPI interest causes some balance growth
- Likely hits 30-year write-off
- Total paid: ≈£18,000-£25,000
Winner: Plan 1 (by ≈£3,000-£5,000)
📊Scenario 2: High Earner (£30k → £80k career)
Starting debt: £50,000
Plan 1:
- Capped interest (≈3.2%) protects from excessive growth
- Pays off in 10-12 years
- Total interest manageable
- Total paid: ≈£55,000-£62,000
Plan 2:
- RPI + 3% (≈6.2%) causes significant balance growth
- Balance can balloon to £70k+ before declining
- Pays off in 12-15 years, but at huge total cost
- Total paid: ≈£70,000-£85,000
Winner: Plan 1 (by ≈£15,000-£23,000)
Should You Make Voluntary Repayments?
For most borrowers on both Plan 1 and Plan 2, overpaying is not recommended.
Overpay If:
- You will definitely pay off the loan before write-off
- You're a very high earner with Plan 2 (to avoid 6.2% interest)
- You have excess income and no better investment options
- The psychological burden outweighs financial logic
Don't Overpay If:
- You're unlikely to fully repay before write-off (most people)
- You could invest in a pension instead (reduces student loan via salary sacrifice)
- You need emergency funds or have other debts
- Your career trajectory is uncertain
- You're on Plan 1 with capped interest
ℹ️Better Strategy: Pension Sacrifice
Instead of overpaying, consider maximizing pension contributions. Pension contributions reduce your taxable income, which means:
- Lower student loan repayments (9% saving on contributed amount)
- Income tax savings (20-45%)
- National Insurance savings (≈8-12%)
- Tax-free growth until retirement
Read our Pension vs Overpayments guide for full analysis.
Key Takeaways
✓ Plan 1 generally favors high earners: Capped interest rates mean the loan is much more manageable for those earning £50k+.
💡 Plan 2 protects low earners better: Higher threshold (£29,385) means less is deducted monthly for those on lower salaries.
⚠️ Plan 2 high earners pay significantly more: RPI + 3% interest can cause balances to balloon, even while making large monthly payments.
📊 Most borrowers won't fully repay: ≈70-80% of borrowers on both plans will reach write-off, so overpaying rarely makes sense.
Calculate Your Exact Repayments
Use our plan-specific calculators to model your personal situation and see exactly how much you'll pay.
Related Comparisons & Guides
Plan 2 vs Plan 5
Modern England plans compared
Learn more →Plan 2 vs Plan 4
England vs Scotland comparison
Learn more →Interest Rates Explained
How interest works on student loans
Learn more →Is Overpaying Worth It?
Comprehensive overpayment analysis
Learn more →Pension vs Overpayments
Best use of extra income
Learn more →Repayment Thresholds Guide
Understanding when you pay
Learn more →