How Student Loans Work in the UK
How UK student loans are structured, when repayments start, and what affects your monthly payments.
What is a student loan?
A UK student loan is money borrowed from the government to cover:
- Tuition fees, paid directly to your university (up to £9,250/year in England)
- Maintenance (living costs), paid to you to cover accommodation, food, and travel.
- Postgraduate study, separate loans for Masters (up to £12,167) or Doctoral (up to £28,673) degrees
Key difference from commercial loans: Student loans are income contingent, you only repay based on what you earn, not what you owe. Most borrowers never fully repay them.
The different loan plans explained
Your loan plan determines the rules for repayment. It's based on when and where you studied, not your nationality or current location.
Plan 1
- Pre-2012 England/Wales students
- All Northern Ireland students
- Lower interest rates
- 25 year write off
Plan 2
- 2012-2023 England/Wales students
- Most common plan
- Income-linked interest (up to RPI plus 3%)
- Written off after 30 years
Plan 4
- All Scottish students
- Higher threshold (£32,745)
- Lower interest
- Written off after 30 years
Plan 5
- England 2023+ students
- RPI only interest (simpler)
- Lower threshold (£25,000)
- Written off after 40 years
Not sure which plan you're on? Use our Plan Finder tool.
When do I start repaying?
Repayments don't start immediately after graduation. You begin repaying:
- When you earn above the threshold for your plan (varies from £21,000 to £32,745)
- From April after you finish or leave your course
- Automatically through PAYE if you're employed (like tax deductions)
- Through Self Assessment if you're self-employed
Example timeline
- • June 2024: Graduate
- • September 2024: Start job at £28,000
- • April 2025: First deductions appear in payslip
How much will I repay each month?
Repayments are calculated as a percentage of income above the threshold:
The formula:
Monthly repayment = (Annual salary - Threshold) × Repayment rate ÷ 12
Example: Plan 2, £35,000 salary
(£35,000 - £28,470) × 9% ÷ 12 = £49/month
Example: Plan 4, £35,000 salary
(£35,000 - £32,745) × 9% ÷ 12 = £17/month
Calculate your exact repayments with our calculators.
What about interest?
Interest starts accumulating from the day the loan is paid to you or your university. The rate depends on your plan:
Plan 2 (Variable)
- While studying: RPI + 3%
- Below threshold: RPI only
- £28,470-£52,195: RPI to RPI+3% (sliding)
- Above £52,195: RPI + 3%
Plans 1, 4, 5 (Simpler)
- Plan 1/4: Lower of RPI or Bank Rate + 1%
- Plan 5: RPI only
- No income-based penalties
- Currently around 3.2%
⚠️Plan 2 interest varies with income
Important: For most borrowers, interest causes the balance to grow faster than repayments can reduce it. This is normal and expected. Many loans are written off with a remaining balance.
What is loan write-off?
After a set period, any remaining loan balance is written off (cancelled) automatically, regardless of how much you still owe.
25
years - Plan 1
30
years - Plan 2
30
years - Plan 4
40
years - Plan 5
The write off period starts from the April after you complete (or leave) your course.
Key insight: Around 80% of Plan 2 borrowers will never fully repay their loans. Write-off is the norm, not the exception.
Do student loans affect my credit score?
No.
Student loans do not appear on your credit report and don't affect your credit score. They're managed separately from commercial credit.
What this means:
- Missing payments doesn't damage your credit
- High balances don't reduce your score
- Lenders can't see your student loan balance
However: Mortgage lenders will ask about student loan repayments because they reduce your disposable income, affecting affordability calculations. See our mortgages guide.
Should I overpay my student loan?
For most borrowers: No.
Because the majority of borrowers won't fully repay their loans, overpaying effectively means giving money away that would have been written off.
Don't overpay if:
- You earn below £50k
- Large loan balance (£40k+)
- Not maxing pension contributions
- Have other debts
Consider overpaying if:
- High salary (£70k+) early in career
- Small balance (<£20k remaining)
- Will clearly repay in full
- All other finances optimised
Read our detailed overpayment guide for personalized analysis.
What if I move abroad?
You're still required to repay your student loan if you move overseas, but the rules change:
- Notify Student Loans Company within 3 months of moving
- Country-specific thresholds apply (often different from UK thresholds)
- Self-assess and pay, no automatic deductions
- Currency conversions add complexity
Key takeaways
Student loans are income contingent, you only pay based on what you earn
Most borrowers will have their loan written off with a remaining balance
They don't affect your credit score
Think of it more like a graduate tax than traditional debt
Overpaying is rarely beneficial for typical earners
UK Student Loans: Common Questions
- Do student loans affect my credit score?
- Student loans do not appear on your credit report and will not affect your credit score. Lenders can see the repayment deduction on your payslip, which may reduce how much they are willing to lend for a mortgage, but it has no impact on your credit rating itself.
- How much do I repay on my student loan each month?
- You repay 9% of everything you earn above your plan threshold. On Plan 2 with a £35,000 salary, that works out to roughly £49 a month. If your income drops below the threshold you pay nothing.
- What happens to my student loan when it gets written off?
- The remaining balance is cancelled automatically and you owe nothing more. Written off amounts are not taxed and there is no penalty. Plan 1 loans are written off after 25 years, Plan 2 and Plan 4 after 30 years, and Plan 5 after 40 years.
- Is a student loan real debt?
- A student loan works more like a graduate tax than traditional debt. You only repay while earning above the threshold, it does not affect your credit score, and the balance is written off after a set period. Most borrowers never repay in full.
- Can I repay my student loan early?
- You can make voluntary overpayments at any time with no penalties. But for most graduates overpaying is not worth it because the balance would have been written off anyway. Only high earners who would definitely repay in full tend to benefit from paying early.
Guides hub, quick paths
Student Finance before you go to University, Applicants
Reality checks, the 2026 Plan and planning before you borrow.
- Student finance for applicants
- Student Finance Repayment Plan 2026 (Plan 5) , what changed in 2023+
Repayment, Graduates
How much you pay, when, and strategies that matter.
- Repayment thresholds , when deductions start
- Interest rates explained , what affects your balance
- Should I overpay? , when it makes sense
- High-earners & postgrad Plan 2 , double debt explained
Life events, What if…
How loans interact with major life changes.
- Student loans & mortgages , buying a home
- Moving abroad , repaying from overseas
- Maternity pay & student loans , during parental leave
This hub page explains the high-level concepts; pick a path above for the detailed guide you need.