Plan 2 vs Plan 5 Student Loan: Key Differences Explained
If you started university in England before August 2023, you're on Plan 2. Starting from August 2023, new students are on Plan 5. The differences are significant.
Repayment threshold
- Plan 2: £29,385/year (from April 2026, then frozen for 3 years)
- Plan 5: £25,000/year (rising with RPI from April 2027)
Repayment rate
Both plans: 9% of income above the threshold.
Write-off period
- Plan 2: Written off after 30 years
- Plan 5: Written off after 40 years
Who repays more?
Plan 5 borrowers with average or above-average earnings will likely repay significantly more over their careers — the lower threshold and longer write-off period combine to increase total repayments substantially.
What the difference costs in practice
The two changes compound. A lower threshold means you start repaying sooner and pay 9% on a larger slice of your income. A longer write-off period means you keep doing so for an extra decade. Together they move Plan 5 borrowers from a system most people never clear to one many will.
On a salary of £35,000, the annual difference from the threshold alone is 9% of £4,385, roughly £395 a year, before accounting for the extra ten years of repayments at the end.
Worked comparison at £35,000
- Plan 2: income above threshold £5,615. Annual repayment 9% = about £505, roughly £42 a month.
- Plan 5: income above threshold £10,000. Annual repayment 9% = £900, roughly £75 a month.
The Plan 5 borrower pays about 78% more each year at the same salary, and does so for 40 years rather than 30.
The threshold freeze matters more than the headline rate
Plan 2's threshold being frozen rather than rising with earnings is a quiet but significant change. As wages rise with inflation while the threshold stands still, a growing proportion of income falls above it. The repayment rate stays at 9%, but the amount it applies to increases every year in real terms.
This is sometimes called fiscal drag, and it is the same mechanism that pulls people into higher income tax bands when allowances are frozen. It means projections based on today's threshold understate what you will actually repay.
Interest, and why it matters less than it looks
Interest accrues on both plans and can look alarming on an annual statement, with balances often growing despite years of payments. For anyone who will not clear the loan before write-off, that number is largely theoretical: you repay 9% above the threshold regardless of whether the balance is £30,000 or £80,000.
Interest only becomes a real cost for borrowers who will actually repay in full, because it is the difference between clearing the debt in year 18 and clearing it in year 25. That group is much larger under Plan 5 than under Plan 2.
Which plan you are on, and how to check
Plan is determined by when and where you started your course, not by when you graduated or how much you borrowed. English students starting from August 2023 are on Plan 5, those before are on Plan 2. Scotland, Wales and Northern Ireland operate different plans with their own thresholds.
If you are unsure, your online student finance account holds the definitive answer. It also matters for payroll: being placed on the wrong plan by an employer is a common error, and it results in the wrong deduction every month until corrected.
If you have more than one loan
Undergraduate and postgraduate loans are repaid at the same time and are calculated separately. A postgraduate loan is deducted at its own rate above its own threshold, on top of the 9% for the undergraduate loan, which means a combined deduction noticeably larger than most people anticipate.
Model your own figures
Use our student loan calculator to model repayments under either plan, or go direct to the Plan 2 and Plan 5 calculators. If you also hold a postgraduate loan, the postgraduate calculator covers the combined deduction.
General information, not financial advice. Thresholds and write-off periods are set by government and change. The Student Loans Company holds the definitive record of your plan and balance.