How repayment actually works
You only repay once your income exceeds your plan's annual threshold, and only on the portion above it — similar in structure to how Income Tax bands work. Repayments are deducted automatically through PAYE if you're employed, or via Self-Assessment if you're self-employed.
Current thresholds and rates (2026/27)
| Plan | Annual threshold | Repayment rate above threshold |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
If you have both an undergraduate plan and a Postgraduate Loan, you repay 9% above the undergraduate threshold and 6% above the postgraduate threshold simultaneously — a combined 15% above both thresholds if your income exceeds them both.
Why it works like a payroll deduction, not a traditional loan repayment
Because repayment is based purely on income rather than the amount borrowed, someone who borrowed more and someone who borrowed less, with identical income, repay exactly the same amount each month — the total amount owed only affects how long repayments continue before the loan is either fully repaid or written off.
Overpaying voluntarily
You can make voluntary extra payments directly to the Student Loans Company beyond the automatic payroll deductions. Whether this makes financial sense depends heavily on your specific plan, since a loan likely to be written off before it's fully repaid anyway (common on Plan 2 and Plan 5 given their long write-off periods) may not benefit from early overpayment the way a more traditional loan would.
Key takeaways
- Repayment only starts once income crosses your plan's specific annual threshold.
- Rates are 9% above the threshold for undergraduate plans, 6% for Postgraduate Loans.
- Holding both types means repaying under both simultaneously if your income clears both thresholds.
- Voluntary overpayment isn't automatically beneficial — check your plan's write-off timeline first.