What Is Student Loan Repayment?
Student Loan Repayment
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.
- What Is Student Loan Repayment?
- Student loan repayment is the income-contingent deduction taken from your earnings once they pass a repayment threshold. You repay a percentage of income above the threshold, collected through PAYE or Self Assessment, not a fixed monthly amount.
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.
- Repayments are a percentage of income above a threshold, not a fixed amount, so they rise and fall with your earnings.
- Undergraduate plans (1, 2, 4 and 5) charge 9% on income above the threshold; Postgraduate Loans charge 6%.
- Employees repay automatically through PAYE; the self-employed repay via Self Assessment.
- Your plan type depends on where and when you studied, not on which loan you would prefer.
- If your income drops below the threshold, repayments stop automatically until it rises again.
Which Plan Are You On?
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.
A Worked Example for 2025/26
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.
How Collection Works in Practice
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.
Related terms
- Student loan calculator: work out repayments by plan type.
- Salary calculator: see take-home pay after tax, NI, and loans.
- Check my tax code: verify your PAYE deductions are right.
People also ask
Frequently asked questions
- What are the student loan thresholds for 2025/26?
- For 2025/26 the annual repayment thresholds are £26,065 (Plan 1), £28,470 (Plan 2), £32,745 (Plan 4, Scotland), and £25,000 (Plan 5). Undergraduate plans charge 9% of income above the threshold. The Postgraduate Loan threshold is £21,000 with a 6% rate.
- How are student loan repayments collected?
- If you are employed, repayments are deducted automatically through PAYE alongside Income Tax and National Insurance, based on each pay period. If you are self-employed, they are calculated and paid through your Self Assessment tax return. You repay nothing in periods where your income is below the threshold.
- Do student loan repayments reduce my Income Tax?
- No. Student loan repayments are calculated on your gross income above the threshold and do not reduce your taxable income or your Income Tax bill. They sit on top of Income Tax and National Insurance, which is why they raise your overall marginal deduction rate.
Tax jargon, decoded.
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