High Earners with Plan 2 & Postgraduate Loans
If you have both undergraduate and postgraduate loans and earn a high salary, you're in a unique position, this guide covers your specific considerations.
⚡ Why This Guide Exists
High earners with both Plan 2 and Postgraduate loans face a double hit: You pay 6% of income above £21,000 (Postgraduate) and 9% of income above the Plan 2 threshold. For income above the higher Plan 2 threshold both charges apply, so that slice of income is effectively charged 15% in total.
Plan 2 Repayment Rate
9%
above the Plan 2 threshold £28,470
Postgrad Repayment Rate
6%
above £21,000 threshold
How Combined Repayments Work
ℹ️Two Separate Loans, Two Separate Calculations
Your Plan 2 (undergraduate) and Postgraduate loans are completely independent. Each has its own balance, interest rate, threshold, write-off date, and repayment calculation. They're just both deducted from your salary simultaneously.
| Feature | Plan 2 (Undergrad) | Postgraduate |
|---|---|---|
| Threshold (2025/26) | £28,470/year | £21,000/year |
| Repayment Rate | 9% | 6% |
| Write-off Period | 30 years | 30 years |
| Typical Balance | £40,000-£60,000 | £10,000-£25,000 |
| Interest Rate | RPI plus up to 3 percent (sliding scale). Plan 2 interest is RPI plus 3 percent while studying; after study it varies with income between RPI and RPI plus 3 percent depending on earnings bands set each year. | RPI + 3% (fixed for postgraduate loans) |
What High Earners Actually Pay
📝 Example: Earning £75,000 with Both Loans
You have a £50,000 Plan 2 loan and a £20,000 Postgraduate loan. You earn £75,000/year.
At £75,000 salary, you're repaying over £7,500/year across both loans. That's equivalent to about 10% of your gross salary, or roughly 14% of income above the lower threshold.
Note: this example uses the 2025/26 Plan 2 threshold (£28,470).
Monthly Repayments at Different Salaries
| Salary | Plan 2 | Postgrad | Total |
|---|---|---|---|
| £40,000 | £86/month | £95/month | £181/month |
| £55,000 | £199/month | £170/month | £369/month |
| £75,000 | £349/month | £270/month | £619/month |
| £100,000 | £536/month | £395/month | £931/month |
| £150,000 | £911/month | £645/month | £1,556/month |
⚠️Plan 2 interest and statements
Will You Repay in Full?
This is the critical question. Most borrowers on Plan 2 alone won't repay in full. But if you're a high earner with both loans, you might, especially on the postgraduate loan.
Likely to Repay in Full
- • Starting salary £50,000+
- • Fast career progression expected
- • Smaller loan balances
- • Graduate early in repayment period
- • High-growth sectors (tech, finance, law)
Unlikely to Repay in Full
- • Starting salary under £35,000
- • Career breaks expected (children, etc.)
- • Large loan balances (£60,000+)
- • Part-time or flexible working planned
- • Lower-paid sectors
💡Postgraduate loans are often cleared first, but it depends on balances & repayments
Because the postgraduate threshold is lower (£21,000 vs £28,470), you start repaying it at lower salaries. High earners often clear the postgrad loan 5-15 years before the Plan 2 loan, after which you only pay 9%, not 15%.
Should You Overpay?
The overpayment question is different for high earners. Here's the framework:
| Scenario | Overpay? | Reasoning |
|---|---|---|
| Will repay Plan 2 in full | Maybe | Interest saved might be worth it, but pension/ISA often better |
| Won't repay Plan 2 in full | No | You're giving money to the government for free |
| Will repay Postgrad in full | Possibly | Smaller balance = quicker win, but same pension question |
| Both loans unlikely to clear | Definitely no | Focus money elsewhere |
✓ Where Your Money Is Better Spent
- Pension contributions, tax relief + employer matching = instant 40-100% return
- Emergency fund, 3-6 months expenses in accessible savings
- ISA investing, tax-free growth with market returns
- House deposit, if buying soon, this is usually priority
- High-interest debt, credit cards, etc. (much worse than student loans)
- Then maybe student loan overpayment
ℹ️If You Still Want to Overpay...
If you're going to overpay, target the postgraduate loan first. It's smaller, so you'll clear it faster. Once it's gone, your monthly deductions drop by 6%, giving you immediate cash flow benefit.
Salary Sacrifice: Double Benefit
Salary sacrifice is particularly powerful for high earners with both loans:
📝 Example: Salary Sacrifice at £75,000
You sacrifice £500/month to pension via salary sacrifice.
Plus you may save income tax (for example 40% for a higher-rate taxpayer) and employee National Insurance (e.g., ~2%) on the sacrificed amount, the exact cash cost and tax/NI savings depend on your marginal tax band and how your employer runs payroll (employer NI treatment varies). Your £6,000 sacrifice costs you only about £3,480 in take-home, but your pension receives £6,000+ (with employer NI savings).
See our salary sacrifice guide for more details.
What Happens During Career Breaks?
If you take time out (parental leave, career break, redundancy), both loans pause repayments when income drops below threshold. But they behave differently:
Plan 2 (Threshold £28,470)
Repayments stop if you earn under £28,470. Even on statutory maternity pay, you'll likely pay £0 on Plan 2.
Postgraduate (Threshold £21,000)
Lower threshold means you might still make postgrad repayments during reduced income periods (e.g., part-time return from parental leave).
💡Interest Keeps Accruing
Both loans continue accruing interest during career breaks, even if you're not making repayments. For high earners who will repay in full, this matters more.
Action Plan for High Earners
Your Next Steps
Run your numbers through our Combined Calculator to see lifetime repayments
Determine if you'll likely repay each loan in full (or close to it)
Maximise pension contributions via salary sacrifice first
Build emergency fund and ISA savings before considering overpayment
If overpaying, target the postgraduate loan first (smaller balance)
Review annually as salary and circumstances change
Calculate Your Combined Repayments
See exactly how much you'll pay across both loans based on your salary projections.