What is a Plan 5 Student Loan?
Plan 5 is the newest undergraduate student loan plan in England, introduced for students who started their university course from 1 August 2023 onwards. It replaced Plan 2 for new English starters and comes with significantly different terms — most notably a lower repayment threshold and a longer 40-year write-off window.
The most important thing to understand upfront: your monthly repayment depends entirely on what you earn, not on how much you owe. A £30,000 debt and a £75,000 debt lead to exactly the same monthly deduction if your salary is the same.
Key Fact
Plan 5 repayments were first deducted from salaries in April 2026, regardless of when a borrower left their course. Even students who graduated in summer 2024 or 2025 did not start repaying until April 2026.
Who Is on Plan 5?
You are on Plan 5 if you:
- Started an undergraduate course in England (or at an English institution) on or after 1 August 2023
- Took out a tuition fee loan and/or a maintenance loan from Student Finance England
You are not on Plan 5 if you started before August 2023 (you'll be on Plan 1, 2, or 4), or if you're Welsh (Wales retained Plan 2 terms for newer starters), Scottish (Plan 4), or from Northern Ireland (Plan 1 rules apply). Your payslip will show deduction code 05 once Plan 5 repayments begin.
The £25,000 Repayment Threshold
You only repay when your annual income exceeds £25,000. This threshold is currently frozen until April 2027. You repay 9% of everything you earn above £25,000 — nothing below.
Monthly Repayment Examples (2026/27)
Compare this with Plan 2, whose 2026/27 threshold is £29,385. A Plan 5 borrower on £30,000 repays £37.50/month, while a Plan 2 borrower on the same salary repays just £4.61/month. The lower Plan 5 threshold means earlier and larger repayments kick in.
The Interest Rate: RPI Only
This is where Plan 5 is more favourable than Plan 2. Plan 5 charges interest at RPI only — no income-linked premium on top. For the period 1 September 2025 to 31 August 2026, the Plan 5 interest rate is 3.2% (based on March 2025 RPI).
Why RPI-only matters
Plan 2 charges RPI plus up to 3% depending on your income. A Plan 2 borrower earning £45,000 in 2026/27 could face around 6.2% interest, meaning their debt grows significantly even while they're repaying. A Plan 5 borrower at the same salary pays only 3.2% — their debt grows much more slowly in real terms.
| Plan | Interest Rate (2025–26) | Write-off | Threshold 2026/27 |
|---|---|---|---|
| Plan 1 | RPI or BoE base + 1% (lower of) | 25 years / age 65 | ~£24,990 |
| Plan 2 | RPI + 0–3% (income-linked) | 30 years | £29,385 |
| Plan 4 | RPI or BoE base + 1% (lower of) | 30 years | £32,745 |
| Plan 5 | RPI only — 3.2% | 40 years | £25,000 |
| Postgraduate | RPI + 3% | 30 years | £21,000 (6% rate) |
The 40-Year Write-Off: The Real Cost Driver
Plan 5 debt is written off 40 years after the April you were first due to start repaying. For students who started in 2023/24, that write-off date would be April 2067 — when they are in their mid-60s.
This 40-year window (versus Plan 2's 30 years) is the most significant difference. It means:
- Low to middle earners will be repaying for a larger proportion of their working lives
- The chance of writing off a large remaining balance without full repayment is reduced compared to Plan 2
- An estimated 52% of Plan 5 borrowers are forecast to repay their loan in full — compared to around 23% under Plan 2
What happens at write-off
Any balance remaining after 40 years — whether £500 or £50,000 — is cancelled in full. You do not have to pay a lump sum. The write-off is also triggered by death. The remaining balance is never inherited by your estate.
Worked Examples: Total Repayments Over 40 Years
These examples assume a starting balance of £55,000 (typical for a 3-year English course from 2023), salary growth of 3% per year, and current RPI of 3.2%.
| Starting Salary | Total Repaid | Repaid in Full? | Write-off Balance |
|---|---|---|---|
| £22,000 | ~£0 | No | ~£55,000+ (written off) |
| £28,000 | ~£18,000 | No | Large balance written off |
| £35,000 | ~£42,000 | No | Significant balance written off |
| £45,000 | ~£65,000 | Yes (by year ~28) | £0 |
| £55,000+ | ~£75,000+ | Yes (by year ~18) | £0 |
Plan 5 vs Plan 2: Who Pays More?
There is no single answer — it depends entirely on your salary trajectory:
- Lower earners (under £30,000): Plan 5 costs more. The lower threshold means repayments start sooner and continue for 40 years — often resulting in a larger total repaid than Plan 2 on the same salary.
- Middle earners (£30,000–£55,000): Plan 2 often costs more. Interest up to RPI + 3% causes the Plan 2 balance to grow faster than repayments, leading to larger total outflows before write-off.
- High earners (£55,000+): Both plans typically result in full repayment. Plan 5's lower interest means less total paid under Plan 5 for high earners who clear the debt.
Should Plan 5 Borrowers Make Voluntary Overpayments?
For the majority of Plan 5 borrowers, voluntary overpayments are not recommended. Here's why:
- If you are unlikely to repay in full within 40 years, any voluntary payment simply reduces the amount written off — you gain nothing
- The 3.2% interest rate is roughly in line with or below long-run investment returns (a Stocks and Shares ISA has historically returned 5–8% per year)
- You cannot reclaim voluntary overpayments if your income falls
The exception: if you are on a high salary (£55,000+) and are confident you will repay in full anyway, clearing the debt faster saves interest. Use the 30-year modeller in our calculator to check your specific trajectory.
Salary Sacrifice Can Reduce Your Plan 5 Repayments
Student loan repayments are calculated on your gross income. Salary sacrifice pension contributions reduce your gross pay — which directly reduces your Plan 5 deductions.
Salary Sacrifice Saving Example
Plus the normal income tax and NI savings from salary sacrifice on top. Use our take-home pay calculator to model the full impact.
Sources
GOV.UK: Student Loans Guide 2026–2027 · Student Loans Company · MoneySavingExpert Plan 5 guide · HMRC 2026/27 rates. For guidance only — not financial advice.