Plan 5 Student Loans: How the Newest Plan Works

Who is on a Plan 5 student loan?

Undergraduates in England and Wales whose course started on or after 1 August 2023. Earlier starters stayed on Plan 2, and the change did not affect Scotland (Plan 4), Northern Ireland (Plan 1) or Postgraduate Loans. If you are unsure which side of the boundary you fall on, our guide to which student loan plan you are on covers every case.

Repayments start the April after you leave your course, but with one quirk: no Plan 5 borrower was required to repay before April 2026, regardless of when they left. The first Plan 5 cohorts are therefore only now beginning to see deductions, and the first full three-year graduating class starts repaying from April 2027.

What is the Plan 5 repayment threshold?

£25,000 a year for 2025-26. You repay 9% of everything you earn above it, deducted through PAYE like every other plan. That threshold is the lowest of any undergraduate plan, and it bites early in your career.

An identical £30,000 salary produces a repayment roughly eight times larger on Plan 5 than on Plan 2. For early-career graduates, Plan 5 is the more expensive plan month to month, whatever the headlines about lower interest say.

How is interest calculated on a Plan 5 loan?

Interest is RPI only, from the day your first instalment is paid to your university. There is no income-linked surcharge: a Plan 5 borrower earning £100,000 pays the same rate as one earning £20,000. That removes the RPI + 3% sting that high-earning Plan 2 borrowers face, and it means a Plan 5 balance grows only with inflation in real terms.

RPI for student loans is measured each March and applied from September. Our projections derive future RPI year by year from Bank of England gilt market prices rather than assuming a fixed rate; the mechanics are in our guide to how student loan interest works.

When is a Plan 5 loan written off?

40 years after the April you first became liable to repay. That is a full decade longer than Plan 2. A graduate who leaves university at 21 and starts repaying at 22 will not see write-off until their early sixties, potentially spanning their entire working life.

The combination of a lower threshold and a longer term is deliberate: it is designed so that far more borrowers repay in full than under Plan 2, where roughly half were projected never to clear the balance. Whether that holds depends on future salaries, inflation and policy, none of which are guaranteed. The government has changed thresholds and terms before and may do so again.

Is Plan 5 better or worse than Plan 2?

It depends almost entirely on your earnings path. Lower and middle earners tend to do worse on Plan 5: they pay more each month from the lower threshold, and the 40-year term keeps them paying through decades in which a Plan 2 borrower would already have been written off.

High earners tend to do better on Plan 5. Someone clearing their balance quickly avoids the Plan 2 surcharge entirely, paying RPI instead of RPI + 3% on a large balance. On £60,000 with a £50,000 balance, that surcharge alone is roughly £1,500 a year of extra interest on Plan 2 that a Plan 5 borrower never pays.

You cannot choose your plan, so the comparison matters mainly for understanding your own position rather than optimising it. What you can control is whether to make voluntary overpayments, and with a 40-year horizon that decision deserves real care. Our overpayment guide explains why overpaying a loan heading for write-off wastes money.

Related guides