Check a payslip from this spring onward and something new might be sitting in the deductions column. Anyone who started an undergraduate degree in England from September 2023 has been quietly building up a Plan 5 loan for nearly three years without a single repayment leaving their account — that changed in April 2026, and 2026/27 is the first full tax year that cohort sees a deduction they've never had before. At the same time, everyone still on an older Plan 2 loan has watched their repayment threshold jump from £28,470 to £29,385, and a policy change taking effect this September puts a hard ceiling on how much interest can pile on top. None of this made front-page news, but it changes what actually comes off a graduate's pay this year, and most people repaying a student loan right now have no idea any of it happened.
Which Plan You're On Decides Almost Everything
The plan number depends on where and when you studied, not on how much you borrowed. Plan 1 covers English and Welsh students who started before September 2012, plus most Northern Irish undergraduates throughout. Plan 2 covers English and Welsh students between September 2012 and July 2023. Plan 4 is the Scottish equivalent, running on its own threshold regardless of start date. Plan 5 is the newest, covering anyone who started an English undergraduate course from August 2023 onward, and it replaced Plan 2 for new starters rather than sitting alongside it. On top of any of these, a Postgraduate Loan for a master's or doctoral course runs as a completely separate deduction with its own threshold and rate — more on that below, because it catches out more graduates than any other part of the system.
Plan 5: The Loan That Just Started Taking Money
Plan 5 is the one worth understanding properly right now, because 2026/27 is genuinely its first year of repayments and the rules differ from Plan 2 in ways that matter. The threshold is £25,000 a year — frozen, with no announced date for it to rise — and the repayment rate is the same 9% of everything earned above that line as every other plan. Where Plan 5 actually differs is interest: it charges RPI only, with no additional percentage added on top regardless of income, whereas Plan 2 has historically added up to 3% on top of RPI for higher earners. That sounds like good news for Plan 5 borrowers, and in one sense it is. In another sense it isn't, because Plan 5 runs for 40 years before any remaining balance is written off — the longest term of any UK student loan plan, a full decade longer than Plan 2's 30 years. Lower interest over a much longer clock means more Plan 5 borrowers will actually clear their loan in full rather than have it wiped, which is exactly the trade-off the 2023 reform was designed to produce: cheaper borrowing, but less chance of walking away from part of the debt.
The Numbers for 2026/27
Every plan's repayment threshold moved or stayed put for a reason worth knowing, because it's the single figure that decides whether anything comes off your pay at all. Plan 1 sits at £26,900. Plan 2 rose to £29,385, up from £28,470 the previous year, and is now frozen at that level until at least April 2030 under the current policy. Plan 4, the Scottish plan, sits highest at £33,795. Plan 5 is lowest at £25,000. The Postgraduate Loan threshold is £21,000, and it hasn't moved since the loan was introduced in 2016 — no inflation uprating has ever been applied to it, which is a genuinely unusual choice compared with every other plan and one the government has never explained publicly. Above whichever threshold applies, the undergraduate repayment rate is 9% on income over that line; the postgraduate rate is 6%.
A graduate on Plan 2 earning £35,000 a year repays 9% of the £5,615 sitting above their £29,385 threshold — just over £505 a year, or roughly £42 a month. Move that same salary onto Plan 5's lower £25,000 threshold and the repayment jumps to 9% of £10,000, or £900 a year, £75 a month. The lower interest rate doesn't help month to month; it only changes how much of the total balance actually gets paid off by any given repayment, and how much interest keeps compounding on what's left.
Why Plan 2 Interest Just Got a Ceiling
Plan 2 and Plan 3 (the postgraduate loan) interest has always tracked RPI, with up to an extra 3 percentage points layered on as income rises — a structure that pushed the total rate as high as 6% or more in years when inflation ran hot. From 1 September 2026, that changes: interest on Plan 2 and Plan 3 loans is capped at 6% outright, whatever RPI does, a move the government tied explicitly to protecting borrowers from inflation volatility. For the current period, RPI stands at 3.2%, so most Plan 2 borrowers are already paying somewhere between 3.2% and 6.2% depending on income — the new cap mostly matters if inflation spikes later in the year rather than right now. Plan 1 and Plan 4 borrowers were never exposed to that sliding scale in the first place; their interest has always been capped at whichever is lower, RPI or the Bank of England base rate plus 1%, which for 2026/27 means the 3.2% RPI figure applies rather than the 5% alternative.
The Postgraduate Loan Stacking Trap
Anyone repaying both an undergraduate plan and a Postgraduate Loan is repaying two separate deductions calculated independently, not one combined figure. Take someone on Plan 2 earning £40,000 with both loans still outstanding: the undergraduate portion charges 9% on the £10,615 above the £29,385 threshold, and the postgraduate portion charges a further 6% on the £19,000 above its much lower £21,000 threshold — roughly £955 a year from the undergraduate loan and £1,140 a year from the postgraduate one, close to £175 a month combined before tax and National Insurance are even considered. Payslips list these as separate line items, usually just labelled "Student Loan" and "Postgraduate Loan," and it's genuinely common for people to only notice the second deduction exists once they sit down and add up their gross-to-net gap properly. Postgraduate Loan interest, unlike every undergraduate plan, never varies with income — it's fixed at RPI plus 3% for every borrower regardless of salary, so there's no version of this loan where earning more slows the interest down.
Should You Overpay?
For most graduates, the honest answer is no — and that runs against the instinct most people have toward debt. Student loan interest doesn't affect your credit file the way a personal loan or credit card balance does, there's no penalty for paying the legal minimum, and any balance still outstanding after 30 or 40 years (depending on the plan) is written off completely regardless of size. If modelling suggests you're on track to clear the loan comfortably before that write-off date, overpaying simply hands the government money you'd otherwise have kept, since you were always going to repay the full amount either way. The calculation flips only if you're a high earner on Plan 1 or Plan 4 heading toward full repayment well before the write-off, where clearing the balance early can reduce the total interest paid — everyone else is generally better off treating the deduction exactly like a graduate tax and directing any spare income toward a pension or a Lifetime ISA instead, where the tax relief or government bonus outperforms anything saved on student loan interest.
What to Actually Check on Your Payslip
Confirm you're on the correct plan first, because HMRC and the Student Loans Company don't always agree, and being on the wrong plan means either overpaying or building arrears you'll be chased for later. The plan type appears on your P60 and on the annual statement the Student Loans Company sends by post or through its online account portal — log in and check it directly rather than assuming payroll got it right. If you left university with Plan 2 but started your course after August 2023, you should be on Plan 5, and the difference between the two thresholds is currently over £4,000 a year, enough to matter in a monthly budget. Self-employed borrowers don't see any of this through PAYE at all — the repayment gets calculated through Self Assessment instead, based on the same thresholds, and it's worth flagging to an accountant early rather than discovering a lump sum owed in January.
When the Debt Actually Disappears
Every plan has a hard stop. Plan 1 loans are written off 25 years after the April you were first due to start repaying. Plan 2 and Plan 4 both run for 30 years, as does the Postgraduate Loan. Plan 5 runs for 40 years, which for someone who started their course at 18 means the debt can follow them into their early sixties. Death and permanent disability cancel any remaining balance immediately regardless of plan, and none of it appears on a credit report or affects a mortgage application beyond the effect the monthly deduction has on disposable income used in affordability checks. For the growing number of Plan 5 graduates only just starting to see the deduction land, that 40-year figure is worth writing down somewhere rather than filed away — it's the number that actually determines whether this ever gets paid off, not the interest rate everyone assumes matters most.