Student Loan Plan 2
UK tax glossary · Last reviewed: April 2026
Plan 2 borrowers repay 9% of income above £27,295 per year (2026/27 threshold). Repayments are collected through PAYE alongside tax and NI for employees, or via Self Assessment for the self-employed.
Outstanding balance is written off after 30 years under current rules. Interest accrues at RPI plus up to 3% while studying, and at RPI while repaying (subject to income).
Unlike a traditional loan, you only repay when earning above the threshold. A typical graduate never repays the full balance — the write-off is almost always eventual for middle earners.
Worked example
Graduate salary: £35,000. Repayment: (£35,000 − £27,295) × 9% = £7,705 × 9% = £693.45/year = £57.79/month. Shown separately from tax and NI on your payslip.
Common questions
Does my Plan 2 student loan affect my credit score?
No. Student loan debt does not appear on your credit file. It only affects your take-home pay and does not influence mortgage affordability assessments directly (though reduced net income may matter to lenders).
Can I make voluntary overpayments to clear my Plan 2 balance faster?
Yes. Overpayments go directly to capital. However, as most Plan 2 borrowers never repay in full, overpaying is rarely financially optimal — consider other uses for the money first.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.