Student loans explained: What plan you’re on, when you repay, and how it all works

If you’ve ever been confused about student loans and how they work, there’s lots of people in the same boat as you. Our research here at thinkmoney shows around 3 in 4 graduates don’t even know their full balance. It’s easy to get disengaged over time.

Vix Leyton, thinkmoney’s consumer expert, says: “Letters can go to a parent’s old address for years. Repayments can appear and disappear from payslips in ways that feel confusing and inconsistent. People are effectively allowed to drift away from understanding their own debt, and that is a bad start to adult financial life.

“That gap creates real harm. When people later understand how interest works, how repayment thresholds have changed, or how long the loan will affect their earnings, it can leave them feeling misled and resentful.”

If you’re unsure which student loan plan you’re on, it’s easy to check and getting it right matters. Each plan comes with its own repayment threshold, interest rate and write‑off date, so understanding your plan can help you predict your repayments and stay in control of your finances. We break down how student plans work below.

Student loan plans: what they are and why they matter 

In the UK, you repay your student loan based on your income, not your total loan balance. The plan you’re on decides: 

• when you start repaying (your income threshold) 

• how much you pay (usually 9% of earnings above that threshold) 

• your interest rate 

• when the loan is written off 

There are five main student loan plans: Plan 1, Plan 2, Plan 4, Plan 5, plus Postgraduate loans. Your plan depends on when and where you studied. 

How to know which plan you’re on 

You can work it out from when you started your course: 

• Plan 1 – You started before September 2012 (England/Wales). All Northern Ireland borrowers are also Plan 1.  

• Plan 2 – You started between September 2012 and July 2023 in England or Wales.  

• Plan 4 – You studied in Scotland (1998 onwards).  

• Plan 5 – You started from August 2023 onwards in England. 

• Postgraduate – You took a Master’s or PhD loan.  

You can also check your plan on your Student Loans Company (SLC) account. 

Repayment thresholds for 2026–27 

You only repay when your income goes over your plan’s threshold. From 6 April 2026, the thresholds are as follows.  

• Plan 1: £26,900 (£26, 065 currently)  

• Plan 2: £29,385 (£28,470 currently)  

• Plan 4: £33,795 (£32, 745 currently)  

• Plan 5: £25,000 (£25,000 currently)  

• Postgraduate: £21,000 (£21,000 currently)  

Your repayment is: 

• 9% of earnings above your threshold (Plans 1, 2, 4, 5) 

• 6% above your threshold for Postgraduate loans 

How repayment works 

Repayments work similarly across the board:  

• you pay nothing if you earn below your threshold. 

• if your income goes up and down, your repayments move with it. 

• payments are taken automatically through PAYE, so they stop if your income drops below the line. 

If you're self-employed, payments are calculated and taken when you complete your tax return.

What are the interest rates on UK student loans and do they matter?  

Interest on UK student loans is linked to RPI inflation and changes every September. The rules differ by the plan you’re on. The key rates between 1 September 2025 and 31 August 2026 are:  

• RPI = 3.2% (base inflation measure used for loans) 

• Plan 1: Up to 3.2% (lower of RPI or base rate +1%). 

• Plan 2: Between 3.2% and 6.2% depending on income. While studying it’s 6.2%. 

• Plan 5: RPI only (3.2%) 

• Postgraduate: RPI + 3% (6.2%) cap. 

Does interest on student loans matter?  

For many people, the interest on your student loan makes little difference to your repayments. Student loans are based on your income, not on your loan size or interest rates. Even if your balance grows, your monthly payments don’t change unless your income changes. Many people never pay off the full balance, so added interest is often wiped when the loan is written off.  

However, there are situations where the interest rate does matter. If you’re a high earner, then in some cases, it can be worth paying off your student loan if the interest rates remain high. But even then, it’s a very individual decision that depends on how much you earn, how much you borrowed, what your current balance is, how much you’re likely to save in interest if you pay it all off.  

Key takeaways  

• Your student loan plan depends on when and where you studied. 

• You only repay when your income goes over your plan’s threshold. 

• Most plans take 9% of earnings above that threshold (6% for postgraduate loans). 

• Repayments rise and fall with your income and stop if you drop below the threshold. 

• Interest rates vary by plan and are linked to RPI each September. 

• For many people, interest doesn’t change what they repay because payments are income‑based. 

• Interest only really matters if you’re a high earner likely to clear the loan before it’s written off.