Most students focus on the monthly repayment figure when thinking about borrowing for university. That number is designed to feel manageable. The total amount repayable can tell a very different story.
A note on scope: This article focuses on student finance in England. The rules for Scotland, Wales, and Northern Ireland differ in important ways. For guidance specific to your nation, visit gov.uk/student-finance.
What this piece covers
- UK student loans are administered through the Student Loans Company and sit outside the Consumer Credit Act, so standard APR comparisons do not apply in the same way as with personal loans.
- Interest accrues from the day you receive your first payment, not from the day you graduate.
- The repayment threshold, interest rate, and write-off period have changed multiple times since 2012. Your plan type (Plan 1, Plan 2, Plan 5, or Postgraduate Loan) determines the rules that apply to you.
Which plan type applies to you?
Before looking at costs, it helps to know which set of rules governs your loan. The four main types in England are:
| Plan type | Who it covers | Repayment threshold (2024, 25) | Write-off period |
|---|---|---|---|
| Plan 1 | Students who started before September 2012 | £24,990 per year | Age 65, or 25 years after first repayment due date |
| Plan 2 | Students who started between September 2012 and July 2023 | £27,295 per year | 30 years after first repayment due date |
| Plan 5 | Students starting from August 2023 onwards | £25,000 per year | 40 years after first repayment due date |
| Postgraduate Loan | Postgraduate Master's or Doctoral loans | £21,000 per year | 30 years after first repayment due date |
Repayments on all plans are set at 9% of earnings above the threshold (6% for Postgraduate Loans). Thresholds are reviewed annually. If you are unsure which plan you are on, your payslip or the Student Loans Company portal will confirm it.
Why it matters
The monthly repayment on a student loan is income-contingent. You only repay when you earn above a set threshold. That sounds reassuring, and for many people it is.
If repayments are low relative to the interest building up, the total balance can grow rather than shrink in the early years of repayment. Some borrowers repay for decades and still have a balance written off at the end, having paid back more in interest alone than they originally borrowed.
This is widely described as one of the most common misunderstandings about student finance in the UK. You may want to check the MoneyHelper student loan pages at moneyhelper.org.uk for a fuller explanation of how interest interacts with repayments over time.
Who may be affected
- Students starting or continuing undergraduate or postgraduate study in England.
- Graduates who entered repayment recently and want to understand why their balance does not seem to be falling.
- Parents or carers helping a young person plan for the cost of higher education.
- Anyone comparing a student loan to a personal loan or other form of borrowing.
If you are considering a private or commercial loan to supplement or replace a student loan, the comparison is not straightforward. Private loans carry a contractual APR and are regulated by the FCA. Student loans do not work in the same way. A useful first step is to look at the total amount repayable on any loan, not just the monthly cost.
A worked example using Plan 5 (for illustration only)
The following uses real Plan 5 parameters and the ONS median full-time salary for England (approximately £34,963 in 2023). All figures are illustrative: individual outcomes depend on salary growth, interest rate changes, and personal circumstances.
Starting position
A student beginning in autumn 2023 borrows £9,250 in tuition fees per year for three years, plus a maintenance loan of around £8,400 per year (the maximum for students living away from home outside London in 2023, 24). Total borrowing at the point of graduation: approximately £52,950.
Plan 5 interest is currently set at RPI. Using an illustrative RPI of 3.5% per year, interest in the first year after graduation adds roughly £1,853 to the balance before any repayment is made.
Annual repayment at median salary
The Plan 5 threshold is £25,000. On a gross salary of £34,963, the repayable amount is:
(£34,963 − £25,000) × 9% = £9,963 × 9% = £896 per year (approximately £75 per month)
What happens over time
At that repayment rate, the annual payment of £896 is less than the interest accruing on a balance of £52,950 at 3.5% (approximately £1,853). The balance grows in the early years rather than falling, even while repayments are being made.
If salary grows modestly over a career, repayments will eventually exceed annual interest and the balance will begin to reduce. However, under Plan 5's 40-year write-off period, many graduates on median or below-median earnings are likely to reach the write-off point with a remaining balance. The total amount repaid over 40 years may be substantially more or less than the original sum borrowed, depending on earnings trajectory and future interest rates.
This is not a reason to avoid a student loan. For most people in England, a student loan remains one of the least costly ways to fund higher education. Understanding what you are committing to in total terms, before you start, is worth doing.
The FCA does not regulate student loans directly, but it does regulate the private lending market. If you are ever offered a private loan to cover tuition or living costs, checking whether the lender is FCA-authorised is a sensible first step.
Does a student loan affect your credit score or appear on a credit check?
These questions come up often, particularly for people comparing student loans with personal loans.
Does a student loan appear on a credit report? No. Student loans administered through the Student Loans Company are not reported to the main UK credit reference agencies (Experian, Equifax, TransUnion). They will not appear on a standard credit check.
Does a student loan affect your credit score? Because it does not appear on your credit file, it has no direct effect on your credit score. However, lenders carrying out affordability assessments for mortgages or other credit may ask about student loan repayments, since those repayments reduce your take-home pay and therefore affect how much you can afford to borrow.
Is this different from a personal loan? Yes. A personal loan from a regulated lender is recorded on your credit file, affects your credit score, and is subject to FCA rules on affordability and conduct. Student loans operate under a separate statutory framework.
If you are comparing the two types of borrowing, it can help to look at total amount repayable, the conditions under which repayments are required, and what happens if your income changes.
What to read next
For a fuller explanation of how interest works on borrowing generally, and how total amount repayable differs from monthly cost:
Sources
- MoneyHelper, student loan repayment guidance and plan type explainers: moneyhelper.org.uk
- FCA, consumer information on regulated lending and FCA authorisation: fca.org.uk/consumers
- Bank of England, interest rate and inflation data referenced in student loan interest calculations: bankofengland.co.uk
- ONS, Annual Survey of Hours and Earnings (ASHE) 2023, median full-time earnings: ons.gov.uk
- Student Loans Company, plan type thresholds and repayment terms: gov.uk/repaying-your-student-loan