Student Loan Repayments

If you studied in the UK and took out a student loan, you must repay it once your income exceeds certain thresholds. HMRC collects repayments through the PAYE system (if you are employed) or through Self Assessment (if you are self-employed). There are different repayment plans depending on when and where you studied, each with its own threshold and repayment rate. This guide explains the main plans and how your repayments are calculated and collected.

Plan Types and Thresholds

There are several student loan repayment plans in the UK. Plan 1 applies to students who started an undergraduate course in England or Wales before 1 September 2012, or who studied in Scotland or Northern Ireland at any time. The repayment threshold is £24,990 per year for 2026/27 (or £2,082 per month). You repay 9% of any income above this threshold. Plan 2 applies to students who started an undergraduate course in England or Wales after 1 September 2012. The threshold is £29,000 per year (or £2,416 per month) for 2026/27. You also repay 9% of income above the threshold. Plan 4 applies to Scottish students (those who lived in Scotland and studied anywhere in the UK, or who studied in Scotland). The threshold is £31,395 per year for 2026/27, and the repayment rate is 9%. Plan 5 is a new plan for students starting courses in England from 1 August 2023 onwards. The threshold is £29,000 and the repayment rate is 9%. Postgraduate Loan applies to those who took a master's or doctoral loan. The threshold is £21,000 per year for 2026/27, and you repay 6% of any income above this threshold.

How HMRC Collects Repayments

If you are employed, your employer checks your student loan plan type as part of the payroll process and deducts repayments directly from your wages under PAYE. Your employer uses the student loan information HMRC provides through the RTI system. Repayments appear on your payslip as a separate deduction, similar to Income Tax and National Insurance. If you have more than one job, repayments are only taken from the job where your earnings exceed the threshold. If you are self-employed, you must report your student loan repayment on your Self Assessment tax return. The Student Loan Company (SLC) tells HMRC the plan type and the outstanding balance. HMRC's online system calculates the repayment amount and adds it to your Self Assessment tax bill. You pay it along with your Income Tax and National Insurance by the 31 January deadline.

Interest Rates

Interest rates vary by plan. Plan 1: the rate is the lower of the Retail Price Index (RPI) or the Bank of England base rate plus 1%. Plan 2: the rate depends on your income. While studying and until the April after graduation, it is RPI plus 3%. After that, it is RPI (if you earn under £29,000), RPI plus up to 3% (if you earn between £29,000 and £49,130), or RPI plus 3% (if you earn over £49,130). Plan 4: RPI or up to RPI plus 2.5% depending on income. Plan 5: RPI. Postgraduate Loan: RPI plus 3% while studying, then RPI (if under £21,000), or RPI plus up to 3% (if over £21,000). Interest is charged from the day the loan is taken out.

When Repayments Stop

Student loans are written off after a set period. Plan 1: written off after 25 years (or when you turn 65 if you were already repaying before 6 April 2006). Plan 2: written off after 30 years. Plan 4: written off when you turn 65. Plan 5: written off after 40 years. Postgraduate Loan: written off after 30 years. If you die before the loan is repaid, the outstanding balance is cancelled. If you become permanently disabled, you may also qualify for early write-off. You can make voluntary additional repayments directly to the Student Loan Company at any time, but check whether this is beneficial given the interest rate and your future earnings.

Repaying on Self Assessment

If you are self-employed, the repayment is calculated based on your profits (not your turnover). The threshold applies to your annual profits. For example, if you are on Plan 1 and your self-employed profits are £40,000, you repay 9% of £15,010 (£40,000 minus £24,990), which is £1,350.90 for the year. This is added to your tax bill and paid by 31 January. If you also have employment income, HMRC combines both sources to check whether you exceed the threshold. You must keep your contact details up to date with the Student Loan Company to ensure you receive statements about your balance.

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