UK Student Loan Repayment Calculator

How UK student loan repayment works

UK student loans work very differently from personal loans or mortgages. They are income-contingent — meaning repayments are tied to what you earn, not to the size of your loan. You never have a fixed monthly bill that follows you regardless of income. Instead, your employer deducts a percentage of your earnings above a set threshold each month, automatically, through the PAYE system alongside your income tax and National Insurance contributions. If your income falls below the threshold for any period — due to a career break, redundancy, or working part-time — your repayments stop automatically with no penalty.

This design has an important implication: for many graduates, especially those on Plan 2 who started university between 2012 and 2023, the loan functions more like a graduate tax than a traditional debt. The Institute for Fiscal Studies has projected that around 75–80% of Plan 2 graduates will not repay their loans in full before the 30-year write-off. For those graduates, total repayments are capped by income — the balance simply evaporates at write-off without affecting your credit score.

UK student loan plans explained (2024/25)

There are five distinct loan plans in England, Wales, Scotland, and Northern Ireland, each with different repayment thresholds, interest rates, and write-off periods. Your plan is determined by when and where you studied — you cannot choose it.

Plan 2 — the most common and most misunderstood

Plan 2 covers the largest cohort of current graduates — anyone who started an undergraduate degree in England or Wales between September 2012 and July 2023. The threshold is £27,295 for 2024/25. Repayments are 9% of income above this figure. On a £35,000 salary, you repay 9% × (£35,000 − £27,295) = £693/year (£57.79/month). The interest rate is RPI + 0% for incomes below the threshold, rising on a sliding scale to RPI + 3% for incomes above £49,130. In 2024/25, this means effective rates between approximately 4.3% and 7.3%.

Plan 5 — the new system from 2023

Students starting in England from August 2023 onwards are on Plan 5. The threshold is lower (£25,000), meaning repayments begin at a lower income. Critically, the write-off period is 40 years — ten years longer than Plan 2. The interest rate is RPI only, removing the additional +3% premium for high earners. The lower threshold combined with a 40-year term means the overall lifetime repayment for median earners is significantly higher than Plan 2 — Plan 5 was designed to increase graduate repayment rates and reduce the proportion of loans written off.

The write-off: why your loan balance isn't always what it seems

One of the most counterintuitive aspects of the UK student loan system is that a large balance does not necessarily mean a large financial burden. Because repayments are income-contingent and loans are written off after a fixed period, a graduate on a median salary with a £50,000 balance may ultimately repay less than a graduate with a £20,000 balance who earns a high income throughout their career. The write-off is not a penalty — it is an intentional feature of the system, functioning as a soft cap on total repayments for lower and median earners. For high earners, the opposite is true: they may repay the full balance plus substantial interest before write-off.

Strategic considerations: Managing your student loan

Voluntary overpayments vs Investing

A common dilemma for graduates who manage to save a lump sum is whether to use it to pay down their student loan early. Psychologically, being "in debt" can be stressful, leading many to make voluntary overpayments to the Student Loans Company (SLC). However, mathematically, this is often a severe mistake for the majority of graduates.

Because most Plan 2 loans will eventually be written off, making an overpayment often means you are paying off money that the government was going to cancel anyway. If your projected career earnings mean you will never clear the principal before the 30-year mark, every extra pound you voluntarily hand over is effectively a donation to the SLC. Overpaying only makes financial sense if your career trajectory guarantees you will clear the balance naturally before the write-off period. In that scenario, overpaying early saves you from the compounding interest (which, at RPI + 3% for high earners, can be considerable).

For everyone else, that capital is far better deployed elsewhere. Contributing to a workplace pension, investing in a Stocks and Shares ISA, or saving for a property deposit will almost certainly yield a better long-term net-worth outcome than paying off a loan that behaves like a time-limited tax.

How does a student loan affect getting a mortgage?

When you apply for a mortgage, lenders conduct strict affordability checks to ensure you can manage monthly repayments even if interest rates rise. Your student loan affects these checks, but not in the way traditional debt does. Mortgage lenders do not look at your total outstanding student loan balance. Having a £10,000 balance or a £100,000 balance makes zero difference to a mortgage underwriter.

What lenders *do* care about is your monthly cash flow. Because your student loan repayment is deducted automatically from your payslip, it reduces your net monthly take-home pay. Mortgage affordability calculators will factor in this reduced net income when deciding how much they are willing to lend you. For example, if you earn £40,000, your gross monthly income is £3,333, but after tax, National Insurance, and a £95 Plan 2 student loan deduction, your net income is lower. The lender assesses your ability to pay a mortgage based on the post-deduction figure. So, while a student loan won't stop you from getting a mortgage, it will slightly reduce the maximum amount you can borrow.

The impact of inflation and interest rates

Because UK student loan interest rates are pegged to the Retail Price Index (RPI), periods of high inflation (such as the cost-of-living crisis experienced in the early 2020s) cause interest rates to spike. When RPI surged past 10%, the government had to implement emergency interest rate caps to prevent Plan 2 interest from skyrocketing to 15%.

Despite the headlines, high interest rates on student loans only truly affect the highest earners. If your loan is destined to be written off, the interest rate is irrelevant to your day-to-day life — whether your balance is growing at 2% or 12%, your monthly repayment remains exactly the same (9% of your income above the threshold). The only people harmed by high interest rates are those who earn enough to actually pay off the loan, as the high interest extends the number of years they must make repayments before the balance hits zero.

Postgraduate Loans: The hidden double tax

If you take out a Master's or Doctoral loan, you are placed on the Postgraduate Loan plan. This operates simultaneously alongside your undergraduate loan. The threshold is much lower (£21,000), and the repayment rate is 6%.

Crucially, these deductions stack. If you earn £35,000, you will pay 9% on your income above £27,295 (for a Plan 2 undergrad loan) *plus* 6% on your income above £21,000 (for your postgrad loan). This creates an effective marginal tax rate that is exceptionally high for young professionals. When combining basic rate Income Tax (20%), National Insurance (8%), Plan 2 repayments (9%), and Postgraduate repayments (6%), your marginal deduction rate hits 43%. This means for every extra £100 you earn via a pay rise or bonus, you only keep £57. This "double deduction" is why postgraduates often feel their take-home pay does not reflect their gross salary.

Frequently asked questions