Plan 2 student loans explained
Understand how Plan 2 repayments, interest and write-off rules affect what you pay.
Who is on Plan 2?
You are on Plan 2 if you are from England or Wales and started an undergraduate course between 1 September 2012 and 31 July 2023. That covers most people who went to university in the 2010s and early 2020s. Your plan type is fixed when you start. It does not change if you move jobs or earn more later.
If you started before 1 September 2012 in England or Wales, you are on Plan 1 instead. See our Plan 1 guide. If you started from August 2023 onwards, you are on Plan 5 instead. See our Plan 5 guide for how that plan works. If your funding came from SAAS in Scotland, you are on Plan 4 instead. See our Plan 4 guide. If you also have an England or Wales Postgraduate Loan, see our Postgraduate Loan guide; that product repays separately from Plan 2.
When you start repaying and how much
Repayments start the April after you finish or leave your course. You only pay when your income is above the threshold. For the 2026/27 tax year that threshold is £29,385 a year (£2,448.75 a month). If you earn less than that, you pay nothing that month.
Repayments are taken automatically through PAYE if you are employed. You will see them on your payslip alongside tax and National Insurance. You do not need to set up a separate direct debit.
You repay 9% of everything you earn above the threshold, not 9% of your whole salary. That is an important distinction. A £35,000 salary does not mean you hand over £3,150 a year.
Worked example: on a salary of £35,000 you repay 9% of £5,615 (the amount above £29,385). That works out to about £42 a month.
If your income drops below the threshold, repayments stop automatically. There is nothing you need to do. Student loan repayments never affect your credit score.
How Plan 2 interest works
Interest is based on RPI (Retail Prices Index) from the previous March, applied each 1 September. March 2026 RPI is 4.1%. The rate is set once a year and applies for the whole academic year from September.
While you are studying, you are charged RPI plus 3%. After you graduate, the rate scales with your income. At £29,385 or less you pay RPI only. At £52,885 or more you pay RPI plus 3%. Between those figures the rate slides up gradually.
For the 2026/27 academic year (1 September 2026 to 31 August 2027) the government has capped Plan 2 interest at 6%. Without the cap, the top rate would be 7.1% (RPI plus 3%). Nobody pays the uncapped 7.1% this year. The cap applies regardless of your income.
Interest is added to your balance even when you are not repaying. That is why the amount you owe can look like it is going up even though money is leaving your payslip each month.
The 30-year write-off
Whatever is left on your loan is cancelled 30 years after the April you were first due to repay. After that date you owe nothing more. The write-off itself has no downsides.
Because of this write-off, many Plan 2 borrowers never repay the full balance. Your loan statement might show a large outstanding amount for years even though you are paying each month. That is normal. It also changes whether overpaying makes financial sense.
Should you overpay?
Overpaying is only worth considering if you are on track to fully repay before the 30 years are up. That usually means higher earners with relatively smaller balances. If you are likely to reach the write-off, overpaying is usually money you did not need to spend. The extra payments would have gone toward a balance that was going to be cancelled anyway.
There is no one-size-fits-all answer. What matters is whether you are likely to clear the balance or reach the write-off first.
Everyone's situation is different. Run your own numbers in our student loan calculator to see whether you are likely to clear the balance or hit the write-off.
Related guides
This is general information, not financial advice. Check GOV.UK for official details that apply to your situation.