Around 1.5 million students start higher education in England each year, and most take on a student loan without a clear picture of what it will actually cost them over their working life. Because repayments are tied to income rather than the balance owed, the monthly figure tells you very little about the real cost. Some graduates repay considerably more than they originally borrowed before the debt is written off; others, on lower incomes, repay far less.
What makes student loan repayments different?
Repayments are calculated as a percentage of your income above a set threshold. Below that threshold, you pay nothing at all, regardless of the balance.
The important point is what happens to the rest of the debt while you are not paying it down quickly.
Interest is added to your balance from the day the loan is paid out. The rate is linked to either RPI (Retail Prices Index) or CPI (Consumer Prices Index) depending on your loan plan, and it can rise and fall each April when the rate is recalculated. The balance you owe can grow even when you are making regular repayments.
Why the total amount matters more than the monthly figure
Most borrowers focus on the monthly repayment. That is understandable, but it tells you very little about the real cost.
A simple way to think about it: if your income stays close to the repayment threshold, you may make payments for many years while your balance stays roughly the same or grows. By the time the loan is written off, some borrowers will have repaid considerably more than they originally borrowed. Others, on lower incomes throughout, may have repaid far less before the write-off.
To illustrate: a Plan 2 borrower who graduates with £50,000 of debt and earns a salary that rises gradually from £30,000 may find that, after several years, their balance has grown rather than shrunk, because interest accrues faster than their income-linked repayments reduce it. The Institute for Fiscal Studies has modelled scenarios of this kind and found that, under the pre-2023 Plan 2 system, graduates in the middle of the earnings distribution were likely to repay more in total than they borrowed once interest was accounted for (IFS, 2022, "The new student loan system in England").
The total amount repayable depends on three things working together: your income over your working life, the interest rate applied to your plan, and how long you take to repay.
What are the current repayment plan figures?
There are currently three main repayment plans for English and Welsh borrowers, plus separate arrangements for Scottish and Northern Irish students. The key figures are set out below (source: gov.uk/repaying-your-student-loan).
Last verified: 2025/26 figures. Check gov.uk before publication in June 2026, as thresholds are reviewed each April.
| Plan | Who it applies to | Repayment threshold (2025/26) | Interest rate basis | Write-off period |
|---|---|---|---|---|
| Plan 1 | Started before 1 September 2012 (England/Wales); most Scottish and Northern Irish borrowers | £26,065 per year | RPI or Bank of England base rate + 1%, whichever is lower | 25 years after first repayment due date, or age 65 |
| Plan 2 | Started on or after 1 September 2012 and before 1 August 2023 (England/Wales) | £28,470 per year | RPI + up to 3% (rate varies with income) | 30 years after first repayment due date |
| Plan 5 | Started on or after 1 August 2023 (England) | £25,000 per year | RPI only (no additional margin) | 40 years after first repayment due date |
The threshold and interest rate for each plan are reviewed annually, typically each April. The figures that apply to you depend on when you started your course and where you studied.
What should Plan 5 borrowers know?
Plan 5 is the newest arrangement and applies to students who began courses in England from August 2023 onwards. The lower repayment threshold (£25,000 compared with £28,470 for Plan 2) means repayments begin at a lower income level. The interest rate is simpler, being linked to RPI only with no additional margin based on earnings. However, the write-off period is 40 years rather than 30, meaning borrowers carry the debt for an additional decade compared with Plan 2. Over that extra ten years, interest continues to accrue on any remaining balance, which can substantially increase the total amount repaid by those who do clear their balance. For many Plan 5 borrowers, the extended write-off period means the question of whether to overpay is even more consequential than for Plan 2 borrowers.
Who this affects
- Graduates and current students with outstanding Plan 1, Plan 2, or Plan 5 loans.
- Anyone thinking about making voluntary overpayments (it is worth checking whether that reduces your total cost before doing so, since for many borrowers it may not, see the overpayments section below).
- Parents or partners trying to understand a borrower's overall financial picture.
Note: if you hold a Postgraduate Loan (sometimes called Plan 3) or studied in Wales under Welsh-specific funding arrangements, the thresholds and write-off terms differ from those in the table above. A useful first step is to check your loan type via your Student Loans Company account and verify the applicable figures on gov.uk.
Is making overpayments worth it?
Paying more than your required monthly amount reduces the balance and therefore the interest added to it each year. Whether that actually reduces the total you pay over your lifetime depends on your likely earnings trajectory.
For higher earners who are on course to repay the full balance before the write-off date, overpayments reduce the total interest paid and can shorten the repayment period. In this situation, overpaying can make a meaningful difference to the overall cost.
For borrowers whose income is unlikely to be high enough to clear the balance before write-off, the picture is different. Any overpayment reduces a balance that would eventually have been written off anyway. In that case, the overpayment does not reduce the total amount actually paid over the loan's life, it may simply mean paying more in total than you would have done by sticking to the income-linked schedule.
A useful first step is to use the student loan repayment calculator on gov.uk to model your own situation before committing to extra payments. The key question to ask is: based on realistic income assumptions, am I likely to clear the balance before write-off? If the answer is no, overpaying may not reduce your total cost.
It can also help to compare the interest rate on your student loan with rates available on savings accounts. If your loan interest rate is lower than what you could earn on savings, keeping the money in savings may leave you better off financially, regardless of which repayment plan you are on.
What to read next
For a broader explanation of how interest rates work on borrowing, see the guide on loan interest rates.
For a plain-English explanation of how personal loans compare to student loans in structure and cost, the personal loans guide covers the key differences.
Sources
- UK Government, Repaying your student loan: gov.uk/repaying-your-student-loan
- MoneyHelper, Student loans explained: moneyhelper.org.uk/en/everyday-money/credit/student-loans
- Institute for Fiscal Studies, "The new student loan system in England" (2022): ifs.org.uk/publications/the-new-student-loan-system-in-england