The UK student loan system is undergoing its biggest overhaul in a decade. If you’re a student, recent graduate, or planning to attend university, these changes affect how much you’ll pay and for how long.
What Changed
The new repayment system (Plan 5) applies to students starting courses from September 2026 onwards. Existing borrowers remain on their current plans.
| Feature | Old Plans (1/2/3/4) | New Plan 5 |
|---|---|---|
| Repayment threshold | Varies (£27,295–£31,000) | £30,000 |
| Repayment rate | 9% above threshold | 9% (unchanged) |
| Interest rate | Up to RPI + 3% | RPI only (no markup) |
| Write-off period | 25–30 years | 40 years |
| Loan amount cap | Tuition + maintenance | Tuition + maintenance (unchanged) |
Key Changes
Lower Interest (Good)
Under the old system, interest rates could reach RPI + 3%, meaning your debt grew faster than inflation. Plan 5 caps interest at the Retail Price Index (RPI) rate only. That’s typically lower and means your balance grows less aggressively.
Longer Repayment Term (Bad)
The write-off period increases from 25–30 years to 40 years. You’ll be repaying well into your 50s. This affects everyone, including low earners. The government says this makes the system more progressive — but it also means higher-earning graduates pay more over their lifetimes.
Fixed Threshold (Mixed)
The £30,000 threshold is higher than most current plans, so new graduates earn a bit more before repayments kick in. However, unlike some older plans, it’s not automatically adjusted for inflation. Over time, more of your income will be captured as wages rise.
Who Is Affected
- Current students (before Sep 2026): No change — you stay on your existing plan
- New students (from Sep 2026): Plan 5 applies
- Graduates already repaying: No change
- Mature students and part-time learners: Same rules apply
How to Calculate Your Repayments
Under Plan 5:
- Earn under £30,000: Pay nothing
- Earn £40,000: Pay 9% of (£40,000 – £30,000) = £900/year (£75/month)
- Earn £55,000: Pay 9% of (£55,000 – £30,000) = £2,250/year (£187.50/month)
After 40 years, any remaining balance is written off.
Is It Still Worth Going to University?
Despite the longer repayment term, the Institute for Fiscal Studies estimates that graduates still earn substantially more over their lifetimes than non-graduates. But the gap narrows for lower-earning degrees.
Consider:
- Some degrees (medicine, law, engineering) still have excellent returns
- Others (some arts, communications) may not justify the cost
- Apprenticeships and vocational routes are increasingly viable alternatives
What Smart Students Will Do
- Only borrow what you need — Take the minimum maintenance loan if you can
- Overpay strategically — Only if you’re likely to repay fully within 40 years (high earners)
- Track your balance — Use the official student loans repayment calculator
- Consider employer sponsorship — Some companies offer tuition support
Bottom Line
Plan 5 is worse for high earners (40 years of repayments) but better for low earners (RPI-only interest). The system is still generous compared to most countries — you pay 9% of income above a threshold, and the balance is eventually written off. University remains a good investment for most, but the calculation is less straightforward than it used to be.
What matters most for students and graduates
The three headline changes under Plan 5 are worth memorising: the repayment threshold sits at £30,000, interest is capped at the Retail Price Index with no additional markup, and the write-off period extends to 40 years. If you are starting university in September 2026 or later, these are the terms that will apply to your student loan for the entirety of your repayment journey. The lower interest rate is genuinely beneficial — under the old plans, balances could grow at RPI plus 3%, which meant debt increased faster than many graduates could repay it. The 40-year write-off period, however, is a significant cost: someone earning £40,000 will repay roughly £75 a month for four decades, and high earners may end up repaying substantially more than under the shorter-lived plans that applied to previous generations.
Making smart decisions under Plan 5
If you are a new student starting from September 2026, the first thing to understand is that you only repay when you earn above £30,000 — so there is no penalty for earning a modest salary after graduation. Borrow only what you need: the maintenance loan exists to cover living costs, but taking the maximum when you could manage with less simply adds to a balance that will follow you for 40 years. Use the official student loan repayment calculator to model your specific scenario based on your expected starting salary and career trajectory. If you are a high earner likely to clear the full balance, making voluntary overpayments can save you money on accumulated interest — but for most graduates, the balance will be written off, meaning voluntary payments would be money you did not need to spend. Consider whether apprenticeships or vocational routes might offer better value for your chosen career before committing to the cost of a degree.
Common questions about Plan 5
Q: Do current students switch to Plan 5 automatically? A: No. If you started your course before September 2026, you remain on your existing plan — Plan 2, Plan 4, or whichever applies. Plan 5 is for new students enrolling from September 2026 onwards.
Q: How much would I repay per month under Plan 5 on a £40,000 salary? A: You would pay 9% of the earnings above the £30,000 threshold, which is 9% of £10,000 — roughly £900 per year or £75 per month. No repayments are due if you earn under £30,000.
Q: Should I overpay my student loan to clear it faster? A: Overpaying only makes financial sense if you are a high earner likely to clear the full balance within the 40-year term. For most graduates, the balance will be written off, so voluntary overpayments would be money you do not need to spend.
Q: Is university still worth it under Plan 5? A: For most degree subjects, yes — the graduate premium in lifetime earnings remains significant. However, the return varies widely by subject, so choosing courses with strong employment outcomes (medicine, engineering, law) and considering the total debt commitment is more important than ever.
Further reading and useful references
The official Student Loans Company website is the primary source for repayment terms, balance queries, and the online repayment calculator referenced throughout this article. The Institute for Fiscal Studies has published detailed analysis of Plan 5’s distributional impact, including estimates of how much different graduates will repay over their lifetimes. For a broader understanding of how student finance fits into overall financial planning, our personal finance section covers budgeting, emergency funds, and the relative cost-benefit of different education pathways. If you are choosing between university and apprenticeships, the government’s apprenticeship page provides current information on available schemes and salary expectations.
Planning ahead with a 40-year repayment horizon
The extended repayment period changes how graduates should think about long-term financial planning. With repayments lasting into your 60s, your student loan becomes a near-permanent deduction from take-home pay — similar in practical effect to a modest income tax increase. This makes it especially important to maximise tax-efficient savings vehicles like ISAs and pensions during your working life, because every pound sheltered from tax is a pound that is not competing with a 9% student loan deduction. If you are likely to be a higher earner who will repay the full balance, consider whether salary sacrifice arrangements — which reduce your pensionable income and therefore your student loan repayment — could be worth exploring with a financial adviser. For everyone else, the most productive approach is to accept the 9% deduction as a fact of working life and focus your financial energy on the things you can control: spending, saving, and investing wisely.