What is Student Loan Plan 2?
The repayment plan for post-2012 English and Welsh student loans, with repayments at 9% above £27,295.
Key Facts
- ✓ For courses starting September 2012 onwards (England/Wales)
- ✓ Repayment rate: 9% of income above threshold
- ✓ Repayment threshold: £27,295 (2025/26)
- ✓ Interest: RPI + up to 3% based on income
- ✓ Written off after 30 years
- ✓ Collected through PAYE or Self Assessment
Current Rates (2025/26)
- ▸ Repayment rate: 9%
- ▸ Threshold: £27,295
- ▸ Write-off: 30 years after graduation
Explanation
Student Loan Plan 2 applies to students who took out loans for courses starting on or after 1 September 2012 in England or Wales. Repayments are collected through PAYE (or Self Assessment) at 9% of income above the repayment threshold of £27,295 per year (2025/26). This means if you earn £30,000, you repay 9% of £2,705 = £243 per year (about £20 per month). The loan accrues interest at the rate of inflation (RPI) plus up to 3% depending on your income. Plan 2 loans are written off 30 years after the April following graduation, meaning many borrowers will never fully repay. If you leave the UK, you must still make repayments based on your overseas income. Plan 2 is the most common student loan plan for current graduates. Repayments are separate from and in addition to income tax and National Insurance.
Try the calculator: Use our free calculator to see how student loan plan 2 affects your finances.
Student Loan Repayment Calculator →Other Glossary Terms
The system HMRC uses to collect income tax and National Insurance directly from employee wages.
National InsuranceA UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.
Personal AllowanceThe amount of income you can earn each year before paying income tax — currently £12,570.
Basic Rate (20%)The 20% income tax rate applied to taxable income between £12,571 and £50,270.
Higher Rate (40%)The 40% income tax rate applied to taxable income between £50,271 and £125,140.
Additional Rate (45%)The 45% income tax rate applied to taxable income above £125,140.
Frequently Asked Questions
What does student loan plan 2 mean?
The repayment plan for post-2012 English and Welsh student loans, with repayments at 9% above £27,295.
Why does student loan plan 2 matter?
Understanding student loan plan 2 helps you make informed financial decisions and ensure you pay the correct amount of tax. Getting it wrong could mean overpaying or underpaying HMRC, which may result in penalties or missed savings. Use our calculators to see how student loan plan 2 applies to your personal situation.
Where can I find more information about student loan plan 2?
HMRC publishes official guidance on GOV.UK for all UK tax topics. For a quick overview, our glossary entries are written in plain English and updated each tax year. You can also use our free online calculators to model different scenarios and understand how changes to your income, deductions, or allowances affect your overall tax position.