Why two borrowers can have very different deductions
In the UK, student-loan repayments generally follow an income-based formula, not the size of the outstanding loan. The plan type determines the earnings threshold and, in some circumstances, how interest or write-off rules apply. For the current 2026–27 figures displayed on GOV.UK, Plan 2 has an annual threshold of £29,385 and Plan 5 has one of £25,000. Both undergraduate plans normally take 9% of earnings above the applicable threshold. These are not flat charges on the whole salary. Identifying the correct repayment plan is therefore the first task before comparing debt balances.
The 2026–27 Plan 2 and Plan 5 thresholds
GOV.UK lists £29,385 per year, or £2,448 per month, for Plan 2. The published Plan 5 equivalents are £25,000 per year and £2,083 per month. Those numbers apply to the official UK repayment tables for the relevant period and may change in later tax years. Plan 1, Plan 4 for many Scottish borrowers and postgraduate loans have different thresholds. You should check your Student Loans Company account and current official guidance rather than assuming that every former university student is automatically on Plan 2.
Worked example on a £35,000 salary
For a straightforward full-year comparison using the annual thresholds, someone earning £35,000 would have £5,615 above the Plan 2 threshold, producing roughly £505.35 per year at 9%. On Plan 5, £10,000 lies above the £25,000 threshold, producing around £900 per year. These calculations illustrate the threshold mechanism, not an exact payroll promise. Actual deductions are assessed by pay period and can be influenced by bonuses, variable wages, multiple jobs and rounding. The outstanding loan balance does not set the regular percentage.
How to read a payslip if deductions look wrong
Compare the student-loan deduction on the payslip with the plan type reported to your employer and the relevant weekly or monthly threshold. PAYE payroll systems normally calculate deductions for the pay period. A one-off bonus can push earnings above a threshold even if annual income ends up lower. GOV.UK explains that some borrowers may claim a refund when annual income is below the applicable annual threshold. If the plan appears incorrect, check the Student Loans Company record and ask payroll about the plan notification rather than simply cancelling the deduction.
What interest adds to the balance
Interest may continue to accrue while someone studies, earns below the repayment threshold or is not working. GOV.UK displays a 4.1% current rate for Plan 5 on its repayment page, while Plan 2's interest can depend on income and circumstances and is presently subject to a 6% cap. Rates are time-sensitive and can be revised, so readers should inspect the date and the official statement for their account. Interest increases the balance, but it does not automatically increase the percentage deducted from monthly earnings.
Does repaying faster always save money?
Not necessarily. For some income-contingent borrowers, the balance may be written off under applicable rules before it is ever paid in full. Making voluntary extra payments might then produce little financial benefit compared with keeping a safety buffer or paying more expensive debt. Others who expect to repay in full may benefit from reducing interest, but the decision depends on income forecasts, loan plan, expected career breaks, taxes and financial priorities. Extra repayments are usually difficult to reverse. This is a reason to calculate expected outcomes carefully, not a universal rule to pay extra or never pay extra.
If you hold more than one loan plan
GOV.UK explains that borrowers with multiple undergraduate plan types generally have one repayment calculated using the lowest applicable threshold, with allocations between loans subject to rules. Having a postgraduate loan can produce an additional 6% repayment above its separate threshold as well as the undergraduate deduction. A payslip can therefore show what looks like a large combined payment without it being an error. Borrowers should inspect which plans are attached to their account and which deductions the employer has been instructed to take.
Self-employment, overseas work and changes of income
If you are self-employed or complete Self Assessment, HMRC may calculate student-loan repayments on the annual income reported through the tax return, with PAYE payments taken into account. Overseas repayments can follow separate country-specific earning thresholds and reporting requirements. Moving jobs, receiving irregular bonuses or moving abroad can therefore change how much is collected. Keep your contact and employment information up to date with the Student Loans Company. Failure to report information can create complications even when your ordinary UK payslip previously showed no repayment.
Questions to ask before making a decision
Am I on Plan 2 or Plan 5? Verify in the official repayment account. Is the rate 9% of my whole salary? No, it is normally 9% only above the threshold. Why is my balance rising while I repay? Interest can exceed periodic deductions. Can a bonus trigger a payment? Yes, deductions can follow pay-period earnings. Should I use outdated 2024 thresholds? No, check the 2026–27 figures. Is an extra repayment always wise? Not without comparing the likely repayment horizon and alternative uses for the money.