This guide is for UK graduates who see a "Student Loan" line on their payslip and want to know what it means, how it is calculated, and whether overpaying is ever worth it. It is deliberately narrow: it covers only the repayment mechanism, not general take-home pay (see the take-home pay guide for the full payslip) or self-employed tax.
First: which plan are you on?
The plan type determines your threshold, rate and write-off date, so this is the single most important thing to confirm. Check your payslip or the Student Loans Company. The table reflects the main plans and 2026/27 thresholds.
| Plan | Who | Threshold | Rate | Written off |
|---|---|---|---|---|
| Plan 1 | Started before Sept 2012 | £24,990 | 9% | 25 years after due |
| Plan 2 | Sept 2012 – July 2023 | £27,295 | 9% | 30 years after due |
| Plan 5 | From August 2023 | £25,000 | 9% | 40 years after due |
| Postgraduate | Master's / doctoral loan | £21,000 | 6% | 30 years after due |
Thresholds are reviewed annually. Confirm current figures at GOV.UK: Repaying your student loan.
How the deduction is calculated
You pay a percentage of earnings above the threshold — not on the threshold itself, and not on the whole salary. For a Plan 2 graduate earning £35,000:
- Earnings above £27,295: £7,705
- Annual repayment (9% of £7,705): £693
- Monthly deduction: ≈ £58
If income drops below the threshold — part-time work, a career break, unemployment — deductions stop automatically. There is nothing to defer; the PAYE system simply takes nothing.
Why the balance can grow even while you pay
Interest accrues from the day the loan is paid out. Plan 2 and Plan 5 rates are tied to RPI plus an income-based margin, so a typical graduate paying £693 a year can still see the balance rise when interest charged exceeds repayments. This is alarming to look at but, for most earners, irrelevant — because of the write-off.
Should you overpay? Usually no
Because the debt is wiped after 25–40 years depending on plan, overpaying only makes sense if you are on track to clear the full balance before the write-off date. For most middle-income earners that is unlikely — voluntary overpayments can amount to paying off debt the government would have forgiven. Overpaying tends to make sense only for high earners confident they will clear the balance naturally. The GOV.UK repayment guidance and the Student Loans Company's projection tool can help you judge this.
How it affects a mortgage application
A student loan does not appear on your credit file. But because it reduces your net monthly take-home, lenders factor the deduction into affordability, which can slightly lower the maximum they will lend. It is a cash-flow consideration, not a credit-score one.
If you have more than one loan
Holding an undergraduate plan and a postgraduate loan means both deductions run at once — 9% above the plan threshold plus 6% above £21,000 — so the marginal rate on earnings above both thresholds is 15 percentage points before tax and NI.
See your exact deduction
Enter your salary and select your plan in the UK Salary Calculator to see the precise monthly figure. This guide is educational; thresholds, rates and write-off periods are set by legislation and can change, so confirm your plan before acting on any of it.
Written and maintained by Shaun da Silva, Finance Consultant. Learn how we ensure accuracy and quality in our Editorial Policy.