Your student loan is repaid as a percentage of what you earn above a threshold, not a fixed bill, so it behaves much more like a tax than a normal loan.
A student loan does not behave like a credit card or a mortgage. You never get a fixed monthly bill. Instead, repayments are income-contingent: you pay a percentage of whatever you earn above a threshold, and nothing at all in months where you earn less. Combined with automatic PAYE collection, that makes it feel far more like an extra layer of tax than a conventional debt.
Your plan type is set by where and when you took out the loan, and each has its own 2025/26 threshold:
| Plan | Who it applies to | Annual threshold 2025/26 | Rate |
|---|---|---|---|
| Plan 1 | Pre-2012 England/Wales loans, NI students | £26,065 | 9% |
| Plan 2 | England/Wales 2012 to 2022 starters | £28,470 | 9% |
| Plan 4 | Scottish students | £32,745 | 9% |
| Plan 5 | England students starting from Sept 2023 | £25,000 | 9% |
| Postgraduate | Master's and doctoral loans | £21,000 | 6% |
You can be on more than one plan at once, for example an undergraduate plan plus a Postgraduate Loan, in which case both deductions apply.
Imagine Maya earns a salary of £35,000 and is on Plan 5 (threshold £25,000).
Her repayable income is £35,000 minus £25,000 = £10,000. She repays 9% of that:
£10,000 × 9% = £900 a year, or about £75 a month deducted through PAYE.
Now suppose Maya also has a Postgraduate Loan (threshold £21,000, rate 6%). That deduction is calculated separately on income above £21,000:
(£35,000 minus £21,000) × 6% = £14,000 × 6% = £840 a year.
Her combined student loan deductions are £1,740 a year, on top of Income Tax and National Insurance. Use our student loan calculator and salary calculator together to see the full effect on take-home pay.
For employees, your employer deducts repayments through payroll once you tick the right plan on your starter checklist. The amount is recalculated each pay period, so a bonus month means a bigger deduction that month. If you want to check your deductions are being taken correctly, you can check your tax code and payslip together, though note the student loan is shown separately from the tax code itself.
The self-employed pay through Self Assessment, where the repayment is added to the January tax bill based on the year's profits. Loans are eventually written off after a set period (for example 40 years from the April after graduation for Plan 5), and you cannot be chased for a shortfall beyond your income-contingent repayments.
Because it is a percentage of income above a threshold, a student loan is best thought of as a graduate contribution, not a debt to clear as fast as possible.
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