The short answer
- You repay 9% of income above £29,385 a year. On £35,000 that is £42.11 a month.
- Interest from September 2026 is 4.1% (RPI) on lower incomes, rising to a capped 6% for incomes of about £44,300 or more.
- The threshold is frozen at £29,385 from April 2027 until April 2030.
- Whatever is left after 30 years is written off. Most Plan 2 borrowers are expected to have some written off.
Who has a Plan 2 loan
- English students who started an undergraduate course between 1 September 2012 and 31 July 2023.
- Welsh students who started on or after 1 September 2012.
- Students on Advanced Learner Loans.
English students starting from August 2023 are on Plan 5. Scottish students are on Plan 4, and older English and Welsh loans and Northern Ireland loans are on Plan 1. Your online Student Loans Company account shows your plan.
How repayments work
Repayments start in the April after you leave your course, and only when your income is over the threshold. Employers take them through PAYE, alongside income tax, using a monthly threshold of £2,448.75 or a weekly one of about £565. If your income falls below the threshold, repayments stop automatically.
- Income above the threshold: £35,000 − £29,385£5,615
- Repayment at 9%£505.35 a year
Repayments by salary
The repayment depends only on income, not on how much you owe. Someone owing £20,000 and someone owing £80,000 repay the same each month on the same salary.
Interest and the 6% cap
Plan 2 interest is based on the Retail Prices Index from March each year: 4.1% for September 2026 to August 2027. While you are studying, and once you earn over the upper interest threshold, it is RPI plus 3%. Between the two income thresholds, it rises on a sliding scale. For 2026/27, the government has capped Plan 2 interest at 6%.
| Income | Interest rate |
|---|---|
| £29,385 or less | 4.1% |
| £35,000 | 4.82% |
| £41,135 | 5.6% |
| About £44,300 or more | 6% (cap) |
Without the cap, interest for those earning £52,885 or more would be 7.1%.
The threshold freeze to 2030
The Plan 2 threshold rose to £29,385 in April 2026. It is then frozen until April 2030. As pay rises with inflation, more of your income will be above the threshold, so repayments will grow faster than pay. After 2030 it is expected to rise with inflation again.
Will you ever pay it off?
Most Plan 2 borrowers owe more than they will repay. The balance often grows in the early years because interest is more than the repayments. Whether you clear it depends mostly on your earnings over 30 years.
| Starting salary | Total repaid | Written off | Cleared? |
|---|---|---|---|
| £25,000 | £0 | £161,127 | No |
| £35,000 | £34,266 | £143,815 | No |
| £45,000 | £77,084 | £75,377 | No |
| £60,000 | £86,576 | £0 | Yes, after 22 years |
These projections use simple assumptions and cash figures, not adjusted for inflation. They show the pattern: only high earners are likely to repay in full, and they repay the most.
The 30-year write-off
- Leave universityInterest continues
No repayments until the April after you finish.
- The April afterRepayments start if you earn over the threshold
The 30-year clock starts.
- 30 years laterAny balance is cancelled
Also cancelled if you die or become permanently unable to work.
The written-off amount is not taxed and does not affect your credit record.
Should you overpay?
Voluntary overpayments only save money if you would otherwise clear the loan before the write-off. In the example on £35,000, paying an extra £100 a month raises the total you repay from £34,266 to £70,266, and the loan is still not cleared. The extra money simply reduces the amount written off.
Think twice before overpaying
For most Plan 2 borrowers, money is better used to clear expensive debts, build savings or save for a home or pension.
Self-employed and other income
If you are self-employed or have other income over £2,000, such as rent or savings interest, repayments are worked out through Self Assessment along with your tax. They are due by 31 January after the tax year, and may be included in payments on account.
Plan 2 with a Postgraduate Loan
- Rate
- 9% above £29,385
- At £40,000
- £79.61 a month
- Rate
- 6% above £21,000
- At £40,000
- £95.00 a month
With both loans, the repayments are added together: £174.61 a month on £40,000.
Moving abroad
If you move abroad for more than three months, you must tell the Student Loans Company. You then repay directly, using thresholds set for the country you live in. If you do not provide income details, you can be charged fixed repayments and the higher interest rate.
Myths about student loans
- “It hurts my credit score.” It does not appear on credit files, though mortgage lenders consider the repayments as an outgoing.
- “The balance is what I will pay.” Most people repay less, or more if they earn a lot.
- “Bailiffs collect it.” Repayments come from pay, like tax; they stop if your income falls.
How it feels in your payslip
Because repayments work like an extra tax, a basic-rate taxpayer above the threshold effectively keeps 63p of each extra pound: 20% goes in income tax, 8% in National Insurance and 9% in student loan repayments. A higher-rate taxpayer keeps 49p. A pay rise is still always worth having, but it is smaller after deductions than many people expect.
Pension contributions through salary sacrifice reduce the pay used for repayments, so they save 9% on top of tax and National Insurance. The salary calculator shows your full take-home pay including student loan.
Student loans and mortgages
A student loan does not show on your credit file, and the balance is not treated like other debt. But lenders look at your monthly repayments when working out what you can afford, because they reduce your take-home pay. On £35,000, £42.11 a month is a small amount; on £60,000, £229.61 a month makes more difference. Paying off a Plan 2 loan early to borrow more is rarely worthwhile.
Checking your balance and repayments
- Your online Student Loans Company account shows the balance, interest added and repayments received.
- Your payslip shows the amount taken each pay period, and your P60 shows the total for the tax year.
- If the SLC records do not match your payslips, contact them with copies of your P60s.
- When you are close to clearing the loan, consider switching to Direct Debit to avoid overpaying through PAYE.
Plan 2 compared with Plan 5
- Threshold
- £29,385, frozen to 2030
- Interest
- RPI to RPI + 3%, capped at 6% in 2026/27
- Written off
- After 30 years
- Threshold
- £25,000, then rising with RPI from 2027
- Interest
- RPI only, 4.1%
- Written off
- After 40 years
Plan 5 borrowers start repaying at a lower income and for ten more years, so most will repay more in total than a Plan 2 borrower on the same salary. See the Plan 5 calculator.
Common mistakes
- Treating the balance like a normal debt. What you repay depends on your income, not the balance.
- Overpaying a loan you will never clear. It only reduces the amount written off.
- Not telling SLC when you move abroad. This can lead to penalty interest and fixed repayments.
- Forgetting to claim a refund. If you were charged in a year your income was below the threshold, you can get it back.
What counts as income
- Counts: salary, wages, overtime, bonuses and commission, and self-employed profits.
- Counts if over £2,000 a year in total: unearned income such as savings interest, dividends and rent, reported through Self Assessment.
- Does not count: benefits in kind such as a company car, pension income in most cases, and salary given up through salary sacrifice.
If you have two jobs, each employer looks only at its own pay, so you may repay less through PAYE and the rest through Self Assessment.
Thresholds by pay period
| Paid | Threshold |
|---|---|
| Yearly | £29,385 |
| Monthly | £2,448.75 |
| Weekly | about £565 |
Your employer compares the pay in each period with these figures and takes 9% of anything above them. If your pay is uneven, the monthly amounts can vary a lot even though the yearly total is what matters.
Your first year in numbers
- Interest added this year at 4.82%£2,167.56
- Repaid through your pay£505.35
When interest is more than your repayments, the balance grows even though you are paying. That is normal for income-contingent loans and does not change what you pay each month, which depends only on your income.
Working it out yourself
- Take your yearly income before tax.
- Subtract the Plan 2 threshold of £29,385.
- Multiply what is left by 9%. That is your yearly repayment.
- Divide by 12 for a monthly figure.
The calculator does this for you, adds any Postgraduate Loan, and projects the balance over the years ahead.
Why your balance keeps growing
Many Plan 2 graduates are surprised to see their balance rise every year even though they are repaying. With a £45,000 balance and a £35,000 salary, interest of about £2,168 is added in the first year, while repayments are £505. The balance grows by over £1,600.
This does not mean you will pay more each month: repayments depend only on income. It mostly affects how much is written off at the end. For most middle earners, the size of the balance matters far less than their salary over the next 30 years.
Changes to Plan 2 over time
The Plan 2 threshold started at £21,000 in 2016, rose to £25,000 in 2018, and has risen since with earnings or inflation. Governments have frozen it several times, and it is now frozen at £29,385 from April 2027 to April 2030. The 6% interest cap for 2026/27 is a one-year decision. Because the rules can change, treat any long-term projection as a guide rather than a forecast.