Student Loan Plan 2 Explained
The most common student loan type in England and Wales. You repay 9% of earnings above £27,295 per year. The remaining balance is written off 30 years after your first April following graduation.
What is Plan 2?
Plan 2 applies to students who took out a loan for undergraduate study in England or Wales from September 2012 onwards. These are income-contingent loans, meaning you only repay when earning above the threshold. If you never earn above the threshold, you never repay, and the debt is cancelled after 30 years.
Interest is charged at RPI plus up to 3%, depending on your income. While studying and for the April after graduation, the rate is RPI + 3%.
How it works
Repayments are collected through PAYE if you are employed, or through Self Assessment if self-employed. The 2025-26 threshold is £27,295 per year (£2,274.58 per month). You repay 9% of everything above that.
| Annual salary | Monthly repayment | Annual repayment |
|---|---|---|
| £25,000 | £0 | £0 |
| £30,000 | £20.25 | £243 |
| £35,000 | £57.75 | £693 |
| £50,000 | £170.25 | £2,043 |
If you have both Plan 2 and a Postgraduate Loan, both are deducted simultaneously. The Postgrad threshold is different (£21,000) and the rate is 6%.
Real example
Jake graduated in 2020 with £45,000 of student debt and earns £32,000. His annual repayment is 9% of £4,705 (£32,000 minus £27,295), which comes to £423.45 per year or £35.29 per month.
At this salary, Jake would take over 100 years to clear the full balance through repayments alone. In practice, the loan will be written off in April 2050 (30 years after his first repayment year). Most Plan 2 borrowers never repay the full amount.
Who does this affect?
Around 4.4 million people in England and Wales are on Plan 2. This includes anyone who started an undergraduate degree in England or Wales from September 2012 to July 2023. Students starting from September 2023 onwards may be on Plan 5, which has different terms. Scottish students are typically on Plan 4.
HMRC source
gov.uk/repaying-your-student-loan covers repayment thresholds, rates and when loans are written off.
Related calculators: