UK Student Loan Guide (Plan 1, 2, 3 & 5)
An explanation of how Plan 1, Plan 2, Plan 3 (Postgraduate) and Plan 5 repayments work, and how to compare the projected outcomes of overpaying vs investing.
About This Project
I built this after trying to make sense of my own Plan 2 loan. I'm on track to repay it in full, which means the usual "it's just a graduate tax" line didn't quite answer the question for me. What I really wanted to know was whether I'd be better off overpaying the loan, or investing that money instead.
Most calculators focus on whether you'll repay before the write-off date. Very few actually compare overpaying versus investing in a clear way, especially for people whose outcome is marginal. So I built something that models both sides and lets you adjust the assumptions.
There are no accounts, no tracking, and no data stored. It is just a tool to help you think through the trade-offs using your own numbers.
If you've found it helpful and would like to support the project, you can buy me a coffee. These contributions help with the hosting and domain costs.
Which Plan Am I On?
If you started an undergraduate course in the UK before September 2012, you are on Plan 1. If you started in England between September 2012 and July 2023, you are on Plan 2. If you started from September 2023 onwards, you are on the newer Plan 5.
If you took out a Postgraduate Loan for a Master's or Doctoral course, that loan is on Plan 3.
Plans 1, 2 and 5 share the same basic mechanic: repayments are collected automatically through payroll at 9% of income above a threshold. Plan 3 uses a lower 6% rate above a lower threshold. The key differences are in the threshold amount, the interest rate formula, and the write-off period.
Plan 1, 2, 3 & 5 at a Glance
| Plan 1 | Plan 2 | Plan 3 (PG) | Plan 5 | |
|---|---|---|---|---|
| Who | Started uni pre-2012 | Started uni 2012–2023 | Postgraduate loan | Started uni 2023+ |
| Repayment rate | 9% | 9% | 6% | 9% |
| Threshold (2025/26) | £26,065 | £28,470 | £21,000 | £25,000 |
| Interest rate | Lower of RPI or base rate + 1% | RPI to RPI + 3% (income-scaled) | RPI + 3% (fixed) | RPI only |
| Write-off | 25 years | 30 years | 30 years | 40 years |
| Threshold frozen until | Not frozen (grows with RPI) | 2030 | Frozen indefinitely | 2027 |
How Repayments Work
On Plans 1, 2 and 5, you repay 9% of your income above the repayment threshold. Plan 3 (Postgraduate) uses a lower rate of 6% above £21,000. If you earn less than the threshold, you pay nothing. Repayments are collected automatically through payroll, just like tax and National Insurance.
The key difference is the threshold level. Plan 1's threshold is £26,065 in 2025/26, Plan 2's is higher at £28,470, Plan 5's is £25,000, and Plan 3's is the lowest at £21,000 (frozen indefinitely). This means Plan 3 borrowers start repaying at the lowest salary, while Plan 2 borrowers have the most headroom before repayments begin.
Repayments scale with your income. If your salary drops, so do your repayments. If you lose your job, they stop entirely. This makes student loans very different from conventional debt.
The Write-Off
Loans are written off after a set number of years from the April you were first due to repay: 25 years for Plan 1 (post-2006 loans), 30 years for Plan 2 and Plan 3, and 40 years for Plan 5. Any remaining balance is cancelled regardless of how much is outstanding.
This is important context because if you are not projected to repay in full before the write-off date, any voluntary overpayment would reduce a balance that would otherwise have been cancelled. It does not change the amount collected through payroll.
Plan 1's shorter 25-year write-off means many borrowers will have their loans cancelled sooner. Plan 5's longer 40-year window means borrowers have more time to repay in full, but it also means repayments continue for longer if the loan would have been written off anyway.
Interest Rates
Interest on all plans is linked to the Retail Prices Index (RPI), but the formula differs:
Plan 1
- Lower of RPI or base rate + 1%
- Independent of income
- Typically the lowest rate of all plans
Plan 2
- Below threshold: RPI only (3.2%)
- Above upper threshold: RPI + 3% (6.2%)
- In between: sliding scale
Plan 3
- Fixed RPI + 3% only (6.2%)
- Independent of income
Plan 5
- RPI only (3.2%), regardless of income
- No income-based scaling
These rates may sound high, but remember: interest only matters if you are going to repay the full balance. If your loan is destined to be written off, the interest is simply increasing a number that gets cancelled regardless.
Model Your Own Scenario
Select your plan, enter your salary, loan balance, and assumptions to compare your projected outcomes.
Try the CalculatorFrequently Asked Questions
When does my student loan get written off? ▼
How much do I repay on my student loan each month? ▼
What is the difference between Plan 1, Plan 2, Plan 3 and Plan 5? ▼
What interest rate is charged on student loans? ▼
What Assumptions Does the Calculator Use?
All calculator inputs are adjustable, but the following assumptions and rules are built into the simulation. Understanding these helps you interpret the results.
Loan repayment rules ▼
The calculator supports Plan 1, Plan 2, Plan 3 (Postgraduate) and Plan 5. Plans 1, 2 and 5 use a 9% repayment rate; Plan 3 uses 6%. Plan 1 loans are written off after 25 years; Plan 2 and Plan 3 after 30 years; Plan 5 after 40 years.
Plan 1: The threshold is £26,065 for 2025/26 and grows with RPI. Interest is the lower of RPI or BoE base rate + 1%. Near-term base rates use published forecasts (4.0% for 2026), then fall to a configurable long-run rate.
Plan 2: The threshold is £29,385 from April 2026, frozen until 2030. Interest is income-scaled from RPI to RPI + 3%. Near-term RPI uses published forecasts (3.2% for 2026), then falls to a configurable long-run rate.
Plan 3 (Postgraduate): The threshold is £21,000, frozen indefinitely. Interest is fixed at RPI + 3%, regardless of income.
Plan 5: The threshold is £25,000, frozen until 2027. Interest is RPI only, regardless of income. After the freeze, thresholds grow at a configurable rate.
Tax and investment treatment ▼
The calculator models four investment vehicles: ISA (tax-free growth, no relief on contribution), Pension/SIPP (income tax relief on the way in, 25% tax-free lump sum on withdrawal, remainder taxed at your retirement tax rate), Salary Sacrifice pension (same as SIPP but also saves National Insurance), and GIA (no tax benefits, with an annual tax drag you can set).
Tax bands use 2024/25 rates: 20% basic, 40% higher, 45% additional, with 12% and 2% National Insurance respectively. Income tax thresholds are frozen until 2031 in the model, after which they grow at a rate you can set under Advanced Assumptions (defaults to 2%).
Threshold growth (for loan repayments) and tax band growth (for income tax) are two separate settings, both configurable under Advanced Assumptions.
Freed cashflow after loan payoff or write-off ▼
When your loan is either paid off early (through overpayments) or written off, you stop making repayments. The calculator assumes these freed repayments are then invested until retirement, giving a fair like-for-like comparison between strategies.
You can adjust what percentage of freed cashflow gets invested (the rest is treated as extra spending). This is one of the most important factors in the comparison.
What the calculator does not model ▼
The calculator assumes your salary grows at a steady annual rate. It does not model promotions, redundancies, or career changes. Investment returns are applied as a constant annual rate with monthly compounding, without modelling market volatility or sequence-of-returns risk.
It also does not account for ISA annual allowances, pension lifetime allowances, or future changes to tax rules beyond the configurable tax band growth rate. All projections are estimates, not predictions.