Key takeaways
- Plan 5 takes £394.65 a year more than Plan 2 at every salary above both thresholds, because its threshold is £4,385 lower.
- Every undergraduate plan charges 9% of pay above its threshold; the Postgraduate loan charges 6% above £21,000 and stacks with an undergraduate plan.
- Plan 4 is the gentlest plan, with the highest threshold at £33,795, and Plan 1 sits between Plan 2 and Plan 5.
- For most Plan 2 and Plan 5 borrowers, overpaying does not pay: the loans are written off after 30 years (Plan 2) or 40 years (Plan 5).
Two graduates on the same salary can pay student loan deductions hundreds of pounds apart. Plan 5 takes £394.65 a year more than Plan 2 at every salary above both thresholds — because its threshold is £4,385 lower.
It is one of the most common payslip puzzles in the country. Two friends, same job, same salary, same tax code — and one of them loses £32.89 more a month to student loan. Nobody has done anything wrong. They are simply on different plans, and the plans have different thresholds. This article explains the five plans, works out exactly what each one costs at five salaries, and shows why the Plan 5 borrower always pays more — and what, if anything, you can do about it.
The five plans, and their thresholds
Student loan is not like income tax. There is no band system and no allowance to use up. Each plan charges a flat percentage on everything you earn above its threshold: 9% for the four undergraduate plans, 6% for the Postgraduate loan. The thresholds for 2026/27 are what make the plans different.
| Plan | Who is on it | Threshold | Rate |
|---|---|---|---|
| Plan 1 | England & Wales, started before September 2012 | £26,900 | 9% |
| Plan 2 | England & Wales, started September 2012 – July 2023 | £29,385 | 9% |
| Plan 4 | Scotland | £33,795 | 9% |
| Plan 5 | England, started on or after 1 August 2023 | £25,000 | 9% |
| Postgraduate | Postgraduate loans (England & Wales) | £21,000 | 6% |
The Postgraduate loan is the odd one out in two ways: it charges 6% rather than 9%, and it stacks. If you have an undergraduate plan and a Postgraduate loan, you pay both — 9% above your undergraduate threshold and 6% above £21,000. Everyone else pays one plan only. Your plan is fixed by when and where you studied; you cannot choose it, and you cannot switch.
One more thing to know: the Plan 2 threshold is frozen at £29,385 until April 2030, which means it does not rise with inflation. Every pay rise pushes a bigger slice of your salary above the threshold, so the deduction grows even when the threshold does not move. Plan 5's lower threshold was set deliberately as part of the 2023 reforms, alongside a longer repayment term — 40 years before the balance is written off, against 30 years for Plan 2.
Plan 2 vs Plan 5: the numbers
Here is what the two plans cost at five salaries, with no pension and no other deductions except tax and National Insurance. The pattern is the whole story.
| Salary | Plan 2 / year | Plan 2 / month | Plan 5 / year | Plan 5 / month | Plan 5 costs extra |
|---|---|---|---|---|---|
| £30,000 | £55.35 | £4.61 | £450.00 | £37.50 | £394.65 |
| £35,000 | £505.35 | £42.11 | £900.00 | £75.00 | £394.65 |
| £40,000 | £955.35 | £79.61 | £1,350.00 | £112.50 | £394.65 |
| £50,000 | £1,855.35 | £154.61 | £2,250.00 | £187.50 | £394.65 |
| £60,000 | £2,755.35 | £229.61 | £3,150.00 | £262.50 | £394.65 |
The extra cost never changes. It is £394.65 a year at every salary above both thresholds, because it is simply 9% of the £4,385 gap between the thresholds (£29,385 − £25,000). At £30,000 the difference looks dramatic — £4.61 a month against £37.50 — because the Plan 2 borrower is barely above their threshold while the Plan 5 borrower is £5,000 above theirs. At £60,000 the gap is the same £394.65, but it is a smaller share of a much bigger deduction.
Looked at another way, a Plan 5 borrower on £35,000 takes home £27,819.60 a year after tax, NI and loan, against £28,214.25 for a Plan 2 borrower on the same salary. That is £32.89 a month, every month, for the same job — and it lasts for the whole repayment term, which for Plan 5 is up to 40 years.
What about the other plans?
Plan 1 sits between the two: at £30,000 it costs £279.00 a year, more than Plan 2's £55.35 but less than Plan 5's £450.00. Plan 4 is the gentlest of all, because its threshold is the highest at £33,795: at £40,000 it costs £558.45 a year, against £955.35 for Plan 2 and £1,350.00 for Plan 5. A Scottish graduate on £40,000 therefore keeps £396.90 a year more than an English Plan 2 graduate on the same salary, purely because of the threshold.
The Postgraduate loan is where the numbers get serious. On its own at £40,000 it costs £1,140.00 a year. Stacked with Plan 2 — which is how most people who did a master's after an English undergraduate degree actually pay — the total is £2,095.35 a year: £955.35 for Plan 2 plus £1,140.00 for the Postgraduate loan. That is 15% of everything above the thresholds combined, on top of 20% tax and 8% NI. A £40,000 salary with both loans takes home £30,224.25 a year. If you have both loans, budget for the stack, not for one plan.
Does it pay to overpay?
This is the question every graduate asks sooner or later, and the honest answer is: for most Plan 2 and Plan 5 borrowers, no. The loans are written off after 30 years (Plan 2) or 40 years (Plan 5), and most borrowers never clear the balance before then — the interest, which is linked to inflation plus up to 3%, keeps the balance growing faster than the 9% deduction shrinks it. Paying extra voluntarily usually means paying money that would have been written off anyway. The exception is high earners who will clearly clear the balance well before the write-off date: if your salary is high and rising, and your balance is modest, overpaying can save interest. Work out your own position before sending extra money — the Student Loans Company can give you your balance and an estimate.
What you should do, whatever your plan, is check that the right plan is being applied. Student loan deductions are taken through payroll automatically, and mistakes happen — most often when someone changes jobs and the new employer uses the wrong plan, or when a Postgraduate loan is not stacked when it should be. Your payslip shows the deduction; your plan is on your Student Loans Company account. If the two do not match, tell your employer and the Student Loans Company. Overpayments through payroll are refunded, but only if someone notices.
The bottom line
Your student loan plan is not a choice, but it is not a mystery either. It is a threshold and a percentage, and the deduction is exactly 9% of your pay above that threshold (plus 6% above £21,000 if you have a Postgraduate loan).
Plan 5 borrowers pay £394.65 a year more than Plan 2 borrowers at the same salary, every year, because their threshold is £4,385 lower.
Know your plan, check your payslip, and budget for the figure that actually applies to you — not your friend's.
Check your own deduction
Tick your plan in the student loan calculator and see your deduction alongside your tax, National Insurance and pension.
Questions
Why is my student loan deduction different from my friend's?
Because you are on different plans. Plan 5 has a £25,000 threshold and Plan 2 has a £29,385 threshold, so on the same salary a Plan 5 borrower pays 9% on £4,385 more of their pay — £394.65 a year more, every year, at every salary above both thresholds.
Which student loan plan am I on?
It depends on when and where you studied. Plan 5 is for students in England who started on or after 1 August 2023. Plan 2 is for most English students who started between September 2012 and July 2023. Plan 1 is for older English and Welsh students, Plan 4 is for Scottish students, and the Postgraduate loan is separate and can stack with an undergraduate plan.
Can I choose my student loan plan?
No — your plan is fixed by when and where you studied. What you can control is knowing the deduction, because it is taken automatically through payroll and many people never check whether the right plan is applied. If your payslip shows a deduction you do not expect, check your plan with the Student Loans Company.
See your own deduction
Check your payslip against the calculator — if the plan on your payslip does not match your plan, tell your employer and the Student Loans Company.
Figures are for tax year 2026/27, tax code 1257L, England, Wales or Northern Ireland, no pension unless stated. Student-loan thresholds: GOV.UK — re-verify against the GOV.UK student-loan repayment page before relying on them. Rates: GOV.UK — last checked 5 November 2026. This site is not affiliated with HMRC or GOV.UK. Figures are estimates for guidance, not financial advice.