Student Loans Plan 5 Guide (Repayment, Interest, 2026)

What Is Plan 5 and Who Is on It

Plan 5 applies to new undergraduate students from England and Wales starting their course on or after 1 August 2023. It also applies to students who started a course before August 2023 but have a "break in study" of more than 1 year and restart after that date. Plan 5 is similar to Plan 2 in that both are income-contingent repayment loans — you repay only when your income exceeds the threshold, and unpaid balances are eventually written off. The key difference is the terms: Plan 5 has a lower repayment threshold (£26,000 vs £27,660 for Plan 2), a longer loan term (40 years vs 30 years), and a simpler interest rate structure (RPI only, no variable rates based on income while studying). The government's policy rationale is to make the system more affordable for taxpayers by increasing the proportion of the loan that is repaid.

Plan 5 loans are administered by the Student Loans Company (SLC) just like other plans. Your loan includes: tuition fee loan (paid directly to your university, up to £9,535 for the 2026/27 academic year in England) and maintenance loan (paid to you, means-tested based on household income, up to £13,348 for students living away from home outside London). The maximum maintenance loan for Plan 5 students is higher than under Plan 2, reflecting the government's aim to support living costs. If you started your course before August 2023, you remain on your original repayment plan (Plan 1 for courses starting pre-2012, Plan 2 for 2012–2023). Scottish, Northern Irish, and EU students have different arrangements — Plan 4 (Scotland), Plan 2 (NI), and Plan 2 (EU students who started before 2021). You cannot switch between plans; your plan is determined by when you started your course and where you lived at the time.

Plan 5 Repayment Threshold and Rates

Under Plan 5, you start repaying your student loan when your income exceeds £26,000 per year (or £2,166 per month or £500 per week). This is lower than the Plan 2 threshold of £27,660. The repayment rate is 9% of your income above the threshold. For example, if you earn £30,000, you repay 9% of (£30,000 – £26,000) = 9% of £4,000 = £360 per year, or £30 per month. If your income drops below the threshold in any month, repayments stop automatically (your employer's payroll system handles this via HMRC's Real-Time Information system). Repayments are taken from your salary automatically through PAYE (Pay As You Earn) — you do not need to do anything. If you are self-employed, you repay through Self Assessment alongside your tax return.

If you have more than one job, repayments are calculated based on your total income from all employment and self-employment. If you are close to the threshold, check your combined income carefully — repayments may apply when you would not expect them based on a single salary. If you earn over the threshold only part of the year (e.g., a seasonal worker), you only repay during the months your income is above the threshold — you do not pay back for the whole year. Overtime, bonuses, and commission count as income for student loan repayment purposes — they increase your repayments in the months you earn them. However, this also means your loan is paid off faster. You can make voluntary additional repayments directly to the SLC at any time — but be aware that any overpayment cannot be refunded automatically (you must request it, and the process is slow). The repayment term is 40 years — any balance remaining after 40 years is written off (forgiven). This is 10 years longer than Plan 2's 30-year write-off period.

Interest Rates on Plan 5 Loans

Plan 5 uses a simpler interest rate structure than Plan 2. The interest rate is RPI (Retail Prices Index) only — there is no additional interest rate while you are studying or when you are on a low income. The rate is set each September based on the RPI from the previous March. For the 2026/27 academic year, the interest rate is 4.3% (RPI as of March 2026). This applies to all Plan 5 borrowers regardless of income — unlike Plan 2, where higher earners pay higher interest (up to RPI + 3%). The simpler rate means Plan 5 borrowers pay less total interest than Plan 2 borrowers at higher incomes, but slightly more than Plan 2 borrowers on low incomes (Plan 2 lower earners pay RPI only, which is the same as Plan 5 for everyone).

Interest starts accruing from the day the Student Loans Company pays the first instalment of your loan — so interest builds up throughout your studies and continues until the loan is fully repaid or written off. This means the total amount you owe grows significantly during your degree and in the early years after graduation before repayments start. For example, a Plan 5 student borrowing £60,000 over 3 years (tuition fees plus maintenance) will accrue approximately £8,000–£9,000 of interest during their studies alone. The interest compounds — you pay interest on previously accrued interest. This is why the total loan balance can seem to increase even as you make repayments in the early years. The interest is not deductible for tax purposes — student loan repayments are made from your post-tax income. You can check your current interest rate and loan balance through your online Student Loans Company account (available at gov.uk/sign-in-to-your-student-loan-repayment-account).

Plan 5 vs Plan 2 vs Plan 4 Comparison

The table below summarises the differences between the main plans. Plan 2 (for English/Welsh students starting 2012–2023): threshold £27,660; rate 9% above threshold; interest RPI + up to 3% depending on income; forgiveness after 30 years. Plan 5 (for English/Welsh students starting Aug 2023 onwards): threshold £26,000; rate 9% above threshold; interest RPI only (flat rate); forgiveness after 40 years. Plan 4 (for Scottish students and EU students in Scotland): threshold £25,375; rate 9% above threshold; interest up to RPI + 1% depending on income (typically RPI or lower); forgiveness after 30 years. Plan 1 (for students starting pre-2012 in England/Wales, and NI students): threshold £21,000 (for pre-2012); rate 9%; interest lower of RPI or Bank of England base rate + 1%; forgiveness after 25 years.

The practical impact: a Plan 5 borrower earning £35,000 repays 9% of (£35,000 – £26,000) = £810/year — about £5/month more than the equivalent Plan 2 borrower (who repays 9% of £35,000 – £27,660 = £660/year). Over 40 years, total repayments for a Plan 5 borrower on a median salary are likely to be higher than under Plan 2, which is the government's explicit intention — to increase the proportion of loans that are repaid. However, most graduates will still not fully repay their loan — the Institute for Fiscal Studies estimates that only 20–25% of Plan 5 borrowers will clear their balance before write-off, compared to 30–35% under Plan 2. If you have a Postgraduate Master's Loan (Plan 3) or Postgraduate Doctoral Loan (Plan 6), these are repaid separately at 6% above a threshold of £21,000 — and the repayments stack (you pay 9% for the undergraduate loan and 6% for the postgraduate loan on income above each threshold, though both are collected through the same HMRC system and capped to avoid overwhelming deductions).

How Student Loans Affect Mortgage Applications

Student loan repayments are taken from your salary through PAYE before you receive your net pay, so they do not appear as a "monthly commitment" on your credit file in the same way as credit card or loan payments. However, mortgage lenders do consider student loans when assessing affordability. Lenders typically deduct your student loan repayment from your gross salary when calculating your disposable income for mortgage purposes. For Plan 5 borrowers, this means a reduction in borrowing capacity — a borrower earning £35,000 would have £810/year deducted from their income before the lender calculates affordability. The impact is relatively small — approximately £5,000–£10,000 reduction in maximum mortgage compared to a borrower with no student loan — but it is real. Some lenders (e.g. Nationwide, HSBC) explicitly ask about student loan repayments and factor them into affordability calculations; others may not if they do not appear on your credit report.

If you are a high earner (e.g. earning £60,000+), your monthly student loan repayment is significant — 9% of £34,000 = £3,060/year or £255/month — and this will have a material impact on your mortgage application. Some lenders offer "student loan disregarded" policies — typically for borrowers whose income is well above the affordability threshold or who have a deposit of 40%+. If you are applying for a mortgage jointly with a partner who does not have a student loan, the impact is less because the combined income is higher but only your income is reduced. To mitigate the impact: pay down your student loan early if you expect your earnings to grow significantly (this reduces your monthly deduction, improving mortgage affordability), or choose a lender that is more flexible on student loan treatment. Mortgage brokers can help identify lenders with favourable student loan policies. See our Mortgage guide for more on affordability calculations and First-Time Buyer guide for first mortgage advice.

Student Loan Forgiveness After 40 Years

Any remaining Plan 5 loan balance is written off (forgiven) 40 years after the date you became due to start repaying (usually the April after you graduated or left your course). For example, if you graduate in summer 2027 and start repaying in April 2028, your remaining balance is written off in April 2068. The write-off applies to both the tuition fee loan and maintenance loan components. Under Plan 5, the Institute for Fiscal Studies estimates that the average borrower will have approximately 40–50% of their initial loan balance written off after 40 years — meaning the average Plan 5 borrower repays about 50–60% of the total amount borrowed plus interest. Under Plan 2, the equivalent figure is about 25–30% of the initial balance written off (because the term is shorter, but the interest rate is higher for higher earners, so some borrowers repay more).

The write-off is not treated as taxable income — you do not pay income tax on the forgiven amount (unlike some other countries where student loan forgiveness is taxable). The government's accounts record the "resource cost" — the proportion of the loan not expected to be repaid — as public spending. The write-off applies automatically — you do not need to apply. If you are close to the 40-year mark, the SLC will write to you confirming the balance has been forgiven. The same death and disability forgiveness rules apply as for other plans: your loan is fully written off if you die (the SLC automatically cancels it upon receiving notification from the registrar) or if you become permanently disabled and cannot work (assessed by the Department for Work and Pensions). If you go overseas for more than 3 months, you must notify the SLC — repayments are still required if your income exceeds £26,000 equivalent in local currency (adjusted for purchasing power). The SLC actively pursues overseas borrowers and can take legal action to recover debts, though enforcement is expensive and less common for smaller balances.

Should You Make Voluntary Repayments

Whether to make voluntary (additional) repayments to your Plan 5 loan is a hotly debated question. The case for voluntary repayments: you reduce total interest paid over the 40-year term; you clear the loan faster; you free up your salary from the 9% deduction (which is effectively a tax on earnings above £26,000); and if you expect your income to grow significantly, you may clear the loan before write-off anyway, so paying early saves interest. The case against: the interest rate (RPI, currently 4.3%) is lower than most other forms of debt (credit cards: 20%+; car loans: 5–10%; payday loans: much higher); the loan is written off after 40 years, so if you do not expect to repay the full balance, extra payments are effectively lost money; the loan does not appear on your credit file (no credit score impact); and using spare cash to save for a house deposit (see our Lifetime ISA guide) or invest in a pension may deliver better financial outcomes.

The general advice from MoneySavingExpert, Martin Lewis, and the IFS is: most graduates should NOT make voluntary repayments unless you are a high earner who expects to clear the loan within the 40-year term. If you are earning over £60,000–£70,000 and expect your income to stay high, voluntary repayments can save you tens of thousands in interest. For the average graduate (median starting salary approximately £30,000–£35,000), you will likely still have a balance after 40 years — meaning extra payments now are wasted because the same debt would have been forgiven anyway. Use the Student Loans Repayment Calculator on gov.uk to see how different scenarios affect you. If you do make voluntary repayments, you must pay directly to the Student Loans Company (online at gov.uk or by cheque) — do not confuse with your regular PAYE repayments (which go through HMRC). Any overpayment (paying more than your outstanding balance) is refundable but the process is slow. If you are close to clearing your loan within 2 years, check your exact balance before making extra payments — the SLC does not guarantee to stop your PAYE deductions immediately after you clear the loan, and reclaims can take months.

FAQs

What is the Plan 5 repayment threshold?

£26,000 per year (£2,166 per month or £500 per week). You repay 9% of your income above this threshold. The threshold is fixed until 2026 when it is due to be reviewed — it may rise with average earnings in future years.

How long does a Plan 5 student loan last?

40 years from the date you became due to start repaying (typically the April after you graduate). Any remaining balance is written off after 40 years. This is 10 years longer than Plan 2's 30-year write-off period.

What interest rate applies to Plan 5 loans?

RPI (Retail Prices Index) only — currently 4.3% for 2026/27. Unlike Plan 2, there is no extra interest based on your income. The rate is fixed for the academic year and updated each September based on the previous March's RPI.

Can I switch from Plan 2 to Plan 5?

No. Your repayment plan is determined by when you started your course and where you lived at the time. You cannot voluntarily switch. If you start a new course after a gap in study, the new course determines your plan for that loan only.

Does a Plan 5 student loan affect my credit score?

Student loans do not appear on your credit report in the same way as other debts. They are not listed on your credit file, do not affect your credit utilisation, and do not impact your credit score directly. However, mortgage lenders may ask about your student loan repayments for affordability calculations.