The uncomfortable truth about UK student loans
The majority of English and Welsh graduates on Plan 2 student loans are expected to never fully repay their loan before it is written off. The Institute for Fiscal Studies estimates that around 75% of current Plan 2 borrowers will reach the 30-year write-off point with balances remaining.
How UK student loan repayment actually works
You repay 9% of your income above a threshold. Any remaining balance is cancelled after the write-off period — with no tax consequences and no impact on your credit rating.
Thresholds for 2025-26:
- Plan 1 (started before 2012): Repay 9% above £24,990
- Plan 2 (2012-2023): Repay 9% above £27,295
- Plan 5 (started August 2023+): Repay 9% above £25,000
On a £35,000 salary, a Plan 2 borrower repays (£35,000 - £27,295) × 9% = £693 per year, or £57.75 per month.
Why most Plan 2 borrowers will not repay in full
Plan 2 loans accumulate interest at RPI + 3% — approximately 7.8% per year in 2025-26. On a £45,000 starting balance, annual interest is approximately £3,510. If your income is £35,000 and you repay £693/year, your balance is growing by £2,817 net in the first year.
Plan 5: the 40-year loan
Graduates starting August 2023 or later are on Plan 5, with a 40-year write-off period instead of 30 years. The interest rate is lower (RPI + 1.5%) but repayments continue for a decade longer.
Should you overpay your student loan?
The answer is almost always no if you are on track for write-off. Every pound you voluntarily overpay on a loan that will be written off is money you did not need to spend. The exception: if your income trajectory means you will genuinely repay the full balance before write-off, then overpaying to reduce total interest makes sense.