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How student loan repayments work

UK student loan repayments are income-contingent – you only repay when your income exceeds the threshold for your specific plan. For Plans 1, 2, and 4, the repayment rate is 9% of earnings above the threshold. For postgraduate loans, it is 6%. These deductions are made automatically through PAYE for employed borrowers, or via Self Assessment for self-employed borrowers.

Unlike a mortgage or car loan, there is no fixed monthly payment. If your income drops below the threshold in any pay period, no deduction is made that month. The system is designed to be affordable –repayments adjust automatically as your income changes. Any remaining balance is written off after the plan's write-off period with no tax consequences.

The four UK loan plans — how they differ

Plan 1 applies to borrowers who started an undergraduate course in England or Wales before September 2012, or who took out a loan from a Northern Irish institution. It has the lowest threshold (£24,990 in 2025/26) and the shortest write-off period– whichever comes first: age 65 or 25 years after you became liable to repay. Plan 1 borrowers are the most likely to repay in full.

Plan 2 applies to borrowers who started courses in England or Wales from September 2012 onwards. With a higher threshold (£27,295) and a 30-year write-off period, most Plan 2 borrowers at average UK salaries will not repay the full balance before write-off. This makes voluntary overpayments on Plan 2 loans rarely cost-effective for typical earners.

Plan 4 covers loans from the Student Awards Agency Scotland (SAAS). The threshold is the most generous at £31,395, meaning Scottish borrowers begin repaying at a higher income level. The write-off is 30 years or age 65, whichever comes first.

Postgraduate loans are repaid at 6% of income above £21,000, collected simultaneously with any undergraduate loan. If you have both an undergraduate and postgraduate loan, HMRC will deduct both via PAYE or Self Assessment – meaning up to 15% of income above the relevant thresholds can be deducted at the same time.

Student loan repayments and Self Assessment for self-employed borrowers

Self-employed borrowers do not have loan deductions made through PAYE. Instead, HMRC calculates the full repayment amount via the annual Self Assessment tax return. The repayment is added to the tax bill and must be paid by 31 January following the end of the tax year. There is no monthly collection – it is a single annual payment.

This means self-employed borrowers need to budget carefully for student loan repayments alongside their income tax and National Insurance bill. A sole trader earning £40,000 profit on Plan 2, for example, would owe approximately £1,143 in student loan repayments on top of their tax and NI – all due as a single payment in January.

If you have both employment and self-employment income, your employer will deduct student loan repayments from your salary via PAYE. HMRC then calculates any additional repayment owed on your self-employment profits via Self Assessment and adds it to your tax bill. The combined repayment across both sources cannot exceed 9% (or 6% for postgraduate) of your total income above the threshold.

Common mistakes with student loan repayments

Student loan repayments are straightforward in principle, but the details catch many borrowers out. The five mistakes below lead to unexpected deductions, overpayments, or missed budgeting.

Assuming repayments stop when income dips below the threshold.Repayments are based on each pay period's income. In a month you earn above the threshold you repay; in a month below, you do not. Seasonal or variable income earners are often surprised by months with deductions alternating with months without.

Not updating your employer when switching jobs. Your student loan deduction is based on information from the Student Loans Company passed to HMRC and then to your employer. When starting a new job, declare your loan on your starter checklist – failure to do so can result in delayed or missed deductions, creating an underpayment that HMRC collects via Self Assessment.

Overpaying on a Plan 2 loan. Most Plan 2 borrowers at average UK salaries will not repay the full balance before the 30-year write-off. Voluntary overpayments on a loan that will be written off represent money lost. Model your expected career income trajectory before paying extra.

Forgetting self-employed loan repayments on the Self Assessment return. Self-employed borrowers do not have PAYE deductions –their entire year's repayment is calculated in one go via Self Assessment. This creates a large annual payment that many borrowers do not budget for.

Confusing Plan 1 and Plan 2 thresholds. Plan 1 (pre-2012 England/Wales, some Scottish students) has a significantly lower threshold than Plan 2. HMRC applies the wrong plan occasionally, especially after employment changes. Confirm your loan plan via the Student Loans Company portal.

When repayments are collected — PAYE and Self Assessment deadlines

For employed borrowers, student loan repayments begin in the April after you graduate or leave your course, provided your income is above the threshold. Deductions are made from your pay each month or week through PAYE alongside income tax and National Insurance. Your employer handles the mechanics – you do not need to contact the Student Loans Company.

For self-employed borrowers, the repayment is calculated annually via your Self Assessment tax return. The amount is added to your tax bill due on 31 January. Unlike PAYE, there is no monthly collection –the full year's repayment lands as a single lump sum. If your tax bill (including student loan) exceeds £1,000, HMRC may also require Payments on Account, splitting the expected following year's liability into two advance payments due 31 January and 31 July.

When you approach full repayment, the Student Loans Company will contact you to switch from PAYE collection to direct debit for the final months. This prevents overpayment through the tax system, as PAYE cannot precisely track the remaining balance in real time.