How UK Student Loans Work
Complete guide to UK student finance in 2026. Understand loan plans, repayment rules, interest rates, and forgiveness options.
UK Student Loan Plans 2026
The UK has five different student loan plans, each with different repayment thresholds and rules. The plan you qualify for depends on when you started your course and your residency status.
Current Student Loan Plans
| Plan | Started Course | Repayment Threshold | Interest Rate |
|---|---|---|---|
| Plan 1 | Before 2012 | £26,900 | RPI + 3% |
| Plan 2 | 2012-2016 | £29,385 | RPI + 3% |
| Plan 4 | 2016-2018 | £33,795 | RPI + 3% |
| Plan 5 | 2019 onwards | £25,000 | RPI + 3% |
| Postgraduate | 2018 onwards | £21,000 | RPI + 3% |
How Student Loan Repayment Works
Repayment Calculation
- • 9% of income above threshold
- • Deducted via PAYE system
- • Automatic collection by HMRC
- • No additional forms required
Loan Forgiveness
- • Written off after 25-30 years
- • Death or permanent disability
- • Never fully repaid by most borrowers
- • Remaining balance forgiven
Example Repayment Calculation
Salary: £35,000 (Plan 2 threshold: £29,385)
Income above threshold: £35,000 - £29,385 = £5,615
Monthly repayment: (£5,615 × 9%) ÷ 12 = £42.11
Annual repayment: £5,615 × 9% = £505.35
Interest Rates and Loan Growth
RPI + 3% Interest Rate
All UK student loans accrue interest at RPI (Retail Price Index) inflation plus 3%. This means your loan balance grows during study and after graduation until repayment begins.
2026 estimate: RPI + 3% = approximately 7-8% interest rate. This is much higher than high street savings rates.
£1,000
Loan Balance
After 3 years at 8%
£1,259
£50,000
Typical Loan
After 30 years
£403,000+
£25,000
Threshold
No repayment below
£0/month
Student Loan Planning Strategies
During Study
- • Interest accrues but doesn't compound while studying
- • Consider part-time work to reduce borrowing
- • Parental contributions can reduce loan amounts
- • Maintenance loans are interest-free while studying
After Graduation
- • Keep earnings below repayment threshold initially
- • Consider voluntary early repayment if affordable
- • Monitor RPI changes affecting interest rates
- • Plan career moves around tax implications
Long-term Considerations
- • Most loans will be forgiven after 25-30 years
- • Early repayment saves significant interest
- • Consider loan as investment in future earnings
- • Track loan balance via Student Loans Company
Calculate Your Student Loan Repayments
Use our free student loan repayment calculator to see exactly how much you'll repay and when your loan will be forgiven.