Quick Answer
The 2026-27 student loan repayment threshold for Plan 2 borrowers is £29,385 per year (£2,448/month). You repay 9% of income above this figure via PAYE. Plan 1, Plan 4, Plan 5 and Postgraduate Loan thresholds differ. No repayments apply while income stays below the threshold.
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The student loan repayment thresholds UK 2026 determines when your automatic PAYE deductions begin. In 2026–27, Plan 2 borrowers start repaying once annual income exceeds £29,385 — paying 9% of everything earned above that figure. This guide covers every plan’s threshold, how much you will repay at real salary levels, the interest rates that apply, and when your loan is written off.
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The student loan repayment threshold determines the minimum income at which graduates begin repaying their student loan. For 2026-27, the threshold for Plan 2 borrowers — the most common plan for students who started university in England after September 2012 — is £29,385 per year. Repayments are automatic through PAYE and are calculated as a percentage of income above the threshold, not as a fixed monthly sum.
How Student Loan Repayments Work
Student loan repayments in the UK are administered by the Student Loans Company (SLC) and collected by HMRC through the PAYE system. Repayment is triggered only when your income exceeds the applicable threshold for your plan. You do not make repayments if your income falls below the threshold in any given pay period.
The repayment rate is 9% of income above the threshold for Plans 1, 2, 4, and 5. Postgraduate Loan borrowers repay at 6% above the postgraduate threshold (£21,000 per year). Both deductions can apply simultaneously if you hold both an undergraduate and postgraduate loan.
Interest accrues separately. Plan 2 interest is currently set at 3.2% at the threshold, scaling to 6.2% for incomes at or above £52,885. Interest is applied to your outstanding balance regardless of repayment status.
2026-27 Repayment Thresholds by Plan
| Plan | Annual Threshold | Monthly Threshold | Repayment Rate |
|---|---|---|---|
| Plan 1 (pre-2012 entrants) | £26,900 | £2,242 | 9% |
| Plan 2 (post-2012 England) | £29,385 | £2,449 | 9% |
| Plan 4 (Scotland) | £33,795 | £2,816 | 9% |
| Plan 5 (new entrants from 2023) | £25,000 | £2,083 | 9% |
| Postgraduate Loan | £21,000 | £1,750 | 6% |
Source: gov.uk/repaying-your-student-loan, verified June 2026.
Key Facts About Threshold-Based Repayment
- Income-linked, not balance-linked. Monthly repayments fluctuate with earnings. A salary increase raises repayments; a salary drop or career break suspends them automatically.
- No penalty for non-repayment below threshold. If your income drops below the plan threshold, repayments cease without penalty or accrued arrears.
- Write-off after 25–40 years. Plan 2 balances are written off 25 years after the April following your first repayment. Plan 5 extends this to 40 years.
- Self-employed borrowers repay via Self Assessment. If you are not on PAYE, repayments are calculated and paid through your annual tax return.
Risks & Limitations
- Most Plan 2 borrowers will not repay in full. Institute for Fiscal Studies projections suggest fewer than 25% of current graduates will repay their full balance before write-off. For lower-earning borrowers, interest can outpace the 9% deduction on modest incomes, meaning the balance grows despite consistent repayments.
- Plan 5 carries materially worse terms. The 40-year repayment window and lower £25,000 threshold mean Plan 5 borrowers repay for significantly longer and begin repaying at a lower income level. Lower-earning Plan 5 graduates face a larger cumulative lifetime repayment burden.
- Interest compounds on non-repaying balances. During years when income falls below threshold — common in early careers or during postgraduate study — interest continues to accrue, increasing the outstanding balance.
- Thresholds are not guaranteed to rise. Repayment thresholds are set by government policy and can be frozen, as occurred with Plan 2 between 2021 and 2023, which effectively increased real-terms repayment pressure without a stated threshold cut.
Practical Calculation: Plan 2 on a £35,000 Salary
Assume a Plan 2 borrower with a gross annual salary of £35,000 in 2026-27.
Income above threshold: £35,000 − £29,385 = £5,615
Annual repayment: £5,615 × 9% = £505.35
Monthly repayment: £505.35 ÷ 12 = £42.11
At this salary level, the monthly deduction is lower than the interest accruing on a typical Plan 2 balance of £50,000 (at 3.2–6.2% depending on income band). For most early-career borrowers on a £35,000 salary, the outstanding balance will continue to rise in nominal terms until income reaches approximately £42,000–£45,000.
Assumptions: PAYE employment, standard 2026-27 thresholds, no salary sacrifice arrangements, England residency.
Frequently Asked Questions
What is the Plan 2 student loan repayment threshold for 2026-27?
The Plan 2 repayment threshold for 2026-27 is £29,385 per year (£2,449 per month). You repay 9% of income above this figure through PAYE. If your income is at or below this threshold, no repayments are deducted.
What happens to my student loan if my income falls below the threshold?
Repayments stop automatically. HMRC adjusts your PAYE deductions if income drops below the threshold within a tax year. There is no penalty, no accrued arrears, and no requirement to notify the SLC. However, interest continues to accrue on the outstanding balance.
Does my student loan affect my mortgage application?
Yes, indirectly. Student loan repayments reduce your take-home pay, which lenders assess during affordability checks. On a £35,000 salary, the Plan 2 deduction is approximately £42 per month, which reduces the net income figure used in lender calculations. The outstanding loan balance does not appear on your credit file and does not directly affect your credit score.
Conclusion
The 2026-27 student loan repayment thresholds reflect a graduated system designed to limit the burden on low earners, but the Plan 5 changes signal a materially different long-term cost structure for newer graduates. Understanding which plan applies to you and how the 9% deduction interacts with your take-home pay is the starting point for any post-graduation financial plan.
For a broader view of managing student debt after graduation, see: How to Pay Off Student Debt UK — A Practical Guide. For the tax treatment of graduate earnings, see: Do Students Pay Tax in the UK? Complete Guide 2026.
2026–27 Student Loan Repayment Thresholds: All Plans Compared
The student loan repayment thresholds UK 2026 differs by plan. Below are the confirmed 2026–27 figures from the Student Loans Company and gov.uk. No deductions apply if your income stays below your plan’s threshold.
| Plan | Who It Covers | Annual Threshold | Monthly Threshold | Repayment Rate |
|---|---|---|---|---|
| Plan 1 | Pre-2012 starters (England/Wales); all NI & Scotland starters | £26,900 | £2,241 | 9% above threshold |
| Plan 2 | Post-2012 England/Wales starters (before 2023) | £29,385 | £2,448 | 9% above threshold |
| Plan 4 | Scottish students (post-2012) | £33,795 | £2,816 | 9% above threshold |
| Plan 5 | England/Wales starters from August 2023 onwards | £25,000 | £2,083 | 9% above threshold |
| Postgraduate Loan | UK Master’s/PhD borrowers | £21,000 | £1,750 | 6% above threshold |
If you hold both an undergraduate loan and a Postgraduate Loan, both deductions can run simultaneously — up to 15% of income above the relevant thresholds may be deducted through PAYE in the same pay period.
How Much Will You Actually Repay? Real Salary Examples (Plan 2, 2026–27)
Repayments are calculated only on income above your threshold — not your full salary. The examples below use the Plan 2 threshold of £29,385. Use our student loan repayment calculator to model your own figures.
| Annual Salary | Income Above £29,385 | Monthly Deduction | Annual Deduction |
|---|---|---|---|
| £25,000 | £0 | £0.00 | £0 — no repayment |
| £30,000 | £615 | £4.61 | £55 |
| £35,000 | £5,615 | £42.11 | £505 |
| £40,000 | £10,615 | £79.61 | £955 |
| £50,000 | £20,615 | £154.61 | £1,855 |
| £60,000 | £30,615 | £229.61 | £2,755 |
Student Loan Interest Rates 2026–27
Interest begins accruing from the day your first loan payment lands — including while you study. For Plan 2 borrowers, the rate is linked to the Retail Price Index (RPI) plus an income-based addition:
- At the repayment threshold (£29,385): RPI + 0% = 3.2%
- Between £29,385 and £52,885: scales linearly from 3.2% up to 6.2%
- Above £52,885: RPI + 3% = 6.2%
Plan 1 interest is capped at whichever is lower: RPI or Bank of England base rate + 1% (currently 3.75% + 1% = 4.75%). Plan 5 interest mirrors Plan 2 once in repayment. Postgraduate Loan interest is RPI + 3% throughout. Because interest often exceeds repayments for average earners, many borrowers never clear their balance — making write-off the realistic end point. See our full analysis: How to Pay Off Student Debt UK.
When Is Your Student Loan Written Off?
Any balance remaining at the end of your loan term is cancelled automatically. Write-off timescales confirmed by gov.uk:
- Plan 1: 25 years after first April you were due to repay, or age 65 — whichever comes first
- Plan 2: 30 years after first April you were due to repay
- Plan 4: 30 years after first April you were due to repay
- Plan 5: 40 years after first April you were due to repay
- Postgraduate Loan: 30 years after first April you were due to repay
Because Plan 5 borrowers face a 40-year repayment window and a lower starting threshold (£25,000), they are expected to repay more in total over their careers than Plan 2 borrowers — an important distinction if you started university from 2023 onwards.
Your Effective Marginal Tax Rate Once You Start Repaying
Student loan deductions are collected via PAYE but are not tax-deductible — they do not reduce your taxable income. This means once you cross the Plan 2 threshold, every additional £1 of gross pay faces:
- Income tax (basic rate): 20%
- National Insurance (employee): 8%
- Student loan repayment: 9%
- Effective marginal rate: 37%
This affects salary negotiation, pension salary sacrifice decisions, and whether a bonus pushes you meaningfully above the threshold. For a full picture of deductions at graduate income levels, read: Do Students Pay Tax in the UK? (Complete 2026 Guide).
If you are self-employed, repayments are calculated through your Self Assessment tax return rather than PAYE. HMRC bases the calculation on trading profits above your plan threshold.
Practical Steps: Managing Repayments After Graduation
Since repayments are automatic for PAYE employees, most graduates do not need to “manage” them actively. But the threshold matters when:
- Accepting a job offer — knowing your plan threshold clarifies actual take-home pay
- Considering salary sacrifice (pension, Cycle to Work) — contributions reduce the income used to calculate student loan deductions
- Taking a career break or going part-time — repayments pause automatically if income drops below threshold
- Evaluating voluntary overpayments — usually only beneficial in specific high-earning or near-write-off scenarios
Getting your banking foundations right also reduces financial stress post-graduation. Compare the best student bank accounts in the UK for fee-free overdrafts and cashback perks that ease the transition to full repayment.