Written and reviewed by James Whitfield · Updated for 2025/26 · Editorial standards · Methodology
Plan 1, 2, 4, 5 and Postgraduate loan impact explained with practical salary planning context.
Student loan plan choice can materially change monthly net pay at the same salary. This guide explains thresholds and repayment behaviour in practical terms.
UK student loans use four main repayment plans for undergraduate debt, plus a Postgraduate Loan plan. Each has its own income threshold and repayment rate. The threshold is the income level below which you pay nothing — above it, you pay a percentage of the difference.
Plan 1 (pre-2012 England/Wales, plus Northern Ireland and some Scottish graduates): 9% on income above £24,990 for 2025/26. Plan 2 (post-2012 England/Wales): 9% on income above £27,295. Plan 4 (Scottish post-2012): 9% on income above £31,395. Plan 5 (new system from 2023 onwards): 9% on income above £25,000, with a 40-year repayment term.
Postgraduate loans charge 6% on income above £21,000 and can run simultaneously with an undergraduate plan. If you have both Plan 2 and a Postgraduate Loan, you can be paying 15% of earnings above the respective thresholds — significantly reducing take-home compared to calculator defaults with no loan selected.
At £30,000 on Plan 2, repayment is 9% of (£30,000 – £27,295) = 9% of £2,705 = £243 per year, or £20/month. This is modest. At £35,000, it rises to 9% of £7,705 = £693/year or £58/month. At £45,000, it is 9% of £17,705 = £1,593/year or £133/month. The deduction scales linearly with income above the threshold.
Adding a Postgraduate Loan on top at £35,000: 6% of (£35,000 – £21,000) = 6% of £14,000 = £840/year or £70/month. Combined with Plan 2 (£58/month), a £35,000 earner with both plans is paying £128/month in student loan repayments — £1,533/year. This can reduce monthly take-home from approximately £2,339 to approximately £2,211.
Ignoring student loan when evaluating salary offers inflates take-home estimates by a meaningful amount. For a £35,000 offer, the difference between 'no loan' and 'Plan 2' is £58/month. Add a Postgraduate Loan and it becomes £128/month — a difference of £1,536/year that directly affects mortgage affordability, savings targets and lifestyle costs.
As salary rises, student loan deductions typically rise too. This reduces how much of each pay increase actually lands in your bank account. For Plan 2, each £1,000 of gross salary increase above the £27,295 threshold costs £90 in additional student loan repayment — so the effective marginal take-home rate is lower than income tax and NI calculations suggest.
At £40,000 with Plan 2, the combined marginal rate on the next £1,000 of income is 28% income tax and NI plus 9% student loan = 37%. Every £1,000 gross pay rise only delivers £630 extra in take-home. Without modelling the loan, you would estimate £720. The £90 difference per £1,000 matters significantly over a career of promotions.
Near threshold crossings, the effect can look deceptive. Earning the first pound above the Plan 2 threshold (£27,295) triggers student loan repayments on that excess — but nothing changes below the threshold. This is not a trap like the personal allowance taper, but it does mean that small salary increases just above the threshold have a lower net yield than might be expected.
You can check your student loan plan and current balance via the Student Loans Company (SLC) portal at www.gov.uk/repaying-your-student-loan. Your payslip may show 'Student Loan' without specifying the plan — check your original loan paperwork or SLC account for the plan type. HMRC also shows this in your Personal Tax Account.
If you graduated from a UK university before September 2012, you are almost certainly on Plan 1. Post-September 2012 English and Welsh graduates are Plan 2. Scottish post-2012 graduates are Plan 4. If you started a degree in September 2023 or later in England, you are Plan 5. Postgraduate loan holders will have a separate PGL balance.
Getting the plan wrong in a calculator is one of the most common causes of take-home overestimation. If your actual payslip shows higher deductions than expected, check plan type first. For most graduates in their 20s and 30s working in the UK, the correct plan is Plan 2 and the threshold is £27,295 for 2025/26.
Offer comparisons are often skewed because one scenario includes student loan and another does not. Fix plan assumptions before evaluating gross differences.
For budgeting, keep one conservative scenario that assumes full loan deductions so monthly affordability stays realistic.
Plan 1 applies to students who started UK higher education before September 2012 (or Scottish students before August 2023). The repayment threshold is £24,990/year. At £30,000 salary with Plan 1, repayment = 9% × (£30,000 − £24,990) = 9% × £5,010 = £451/year (£38/month).
Plan 2 applies to students who started in England or Wales from September 2012 onwards. The threshold is £27,295/year. At £30,000 with Plan 2, repayment = 9% × (£30,000 − £27,295) = 9% × £2,705 = £243/year (£20/month). Plan 2 is the most common plan for graduates entering the workforce from 2015 onwards. At £50,000 with Plan 2: 9% × (£50,000 − £27,295) = 9% × £22,705 = £2,043/year (£170/month). Plan 4 applies to Scottish students from August 2023 onwards, with a higher threshold of £31,395/year — meaning repayments start later in the salary range.
Plan 5 applies to students starting courses in England from August 2023. The threshold is £25,000/year (between Plan 1 and Plan 2 levels), with repayments at the same 9% rate. At £35,000 with Plan 5: 9% × (£35,000 − £25,000) = 9% × £10,000 = £900/year (£75/month). The Postgraduate Loan plan has a separate threshold of £21,000/year and uses a 6% rate (not 9%). Postgraduate loan repayments can stack on top of an undergraduate plan, creating both deductions simultaneously.
Once earnings cross the repayment threshold, each £1,000 gross pay rise produces approximately £90 less in loan repayment room (because 9% of £1,000 = £90 goes toward the loan). Combined with income tax at 20% and NI at 8%, the effective marginal rate on a gross pay rise above the threshold becomes approximately 37% (20% tax + 8% NI + 9% loan). Only 63p in every pound of gross increase reaches the bank account.
This has practical implications for salary negotiation. A £2,000 gross rise may only increase net pay by around £1,260 (63%). Understanding this helps set realistic expectations for what a pay rise feels like month to month — and helps frame negotiation around the net monthly gain rather than headline gross.
It is also worth knowing that student loan repayments are income-contingent, not interest-focused. In low-income years (below threshold), no repayment is made regardless of the outstanding balance. Repayments only occur via payroll when earnings are above the threshold. If income drops — due to a career break, part-time work, or redundancy — repayments stop automatically.
Current tax-year thresholds used across this guide and calculator.
Each plan has its own threshold and repayment rate. Repayments only apply to income above the threshold for your plan, so two people on the same salary can repay different amounts. Correct plan selection is one of the biggest drivers of estimate accuracy.
Repayments are based on earnings above your plan threshold through payroll rules, not a simple flat percentage of total gross salary. That threshold effect means repayment rises progressively as income increases. Using the wrong plan in estimates can overstate or understate monthly net pay.
That depends on interest rate, expected earnings path and other priorities such as emergency savings or pension matching. This site provides deduction estimates, not personal financial advice. Use the calculator for cashflow planning, then make repayment strategy decisions with full personal context.
Yes. Use the scenario links in this guide to open prefilled states, then adjust salary, region, loan and pension settings.
Yes. Core content is rendered in HTML and linked to salary/city/tool pages for crawlable internal navigation.
Tax region, tax code, student loan plan, pension contribution and salary sacrifice are the key assumptions to check first.