Student loan repayment thresholds are rising in the 2025-2026 tax year, resulting in slightly lower monthly repayments for some graduates.
However, interest rates remain high, meaning the total cost of borrowing could continue to climb, especially for those on newer loan plans.
Here, we explain what’s changing in the 2025-26 tax year, how interest is set and when student loans are written off.
How you repay your student loan
Graduates are liable to start paying back their student loans from the April after their course finishes.
Repayment only kicks in if you meet the earnings threshold, which is determined by which plan you’re on.
There are several student loan plans, depending on when and where you studied:
- Plan 1: you took out a loan in England and Wales between September 1998 and August 2012 or any time since September 1998 in Northern Ireland.
- Plan 2: you took out a loan in England between September 2012 and 2022, or you took out a loan in Wales after September 2012.
- Plan 4: this plan is exclusive to Scotland, and any Scottish students who started a degree in the UK after September 1998 have moved to Plan 4.
- Plan 5: you took out a loan in England after September 2023.
- Postgraduate loan (known as Plan 3 loans): for Masters students studying in England and Wales after September 2016.
Find out more: repaying your student loan
Student loan repayment thresholds 2025-26
Repayments are paid through the PAYE tax system, meaning they are automatically deducted and sent to HMRC before you receive your salary.
Repayments can vary from month to month, so if you earn more in a particular pay period, such as receiving a bonus or doing overtime, you’ll pay more that month.
Once your income exceeds the threshold, you’ll repay:
- 9% of any income over the threshold for Plans 1, 2, 4 and 5
- 6% for postgraduate loans
Plan 1, Plan 2 and Plan 4 thresholds are increasing by 4.3% for 2025-26. The new rates are shown in the table below.
- Find out more: what is PAYE?
How to work out your monthly repayments
Your monthly student loan repayment is based on how much you earn above your plan’s threshold.
For example, if you’re on Plan 1 and earn £33,000 a year (around £2,750 a month), your monthly threshold in 2024-25 is £2,082. That means repayments are based on around £668 of income above the threshold, with 9% of that coming to around £60 a month.
In 2025-26, the monthly threshold rises to £2,172, reducing the income above the threshold to around £578 – so your monthly repayment would fall slightly to around £52.
- Find out more: tax rates and allowances for 2025-26
How interest works on your student loan
Student loan interest rates are set annually on 1 September using the Retail Price Index (RPI) inflation figure from the previous March, which was 4.3%.
The next rate update will take place on 1 September 2025, based on the RPI from March 2025, which is due to be published on 17 April.
Here’s how interest is set for each loan plan and the current rate.
Interest starts building from the moment your loan is paid out.
For Plan 1 and Plan 4, the rate remains the same while you’re studying and after you graduate and it’s the lower of either RPI or the Bank of England base rate plus 1%.
For Plan 2, Plan 5 and the postgraduate loan, interest is typically higher while studying and is set at RPI plus 3%.
When will your loan be wiped?
If you don’t repay your loan in full, the remaining balance will eventually be written off. When this happens depends on your loan plan:
- Plan 1: 25 years after the April you were first due to repay
- Plan 2: 30 years after the April you were first due to repay
- Plan 4: 30 years after the April you were first due to repay
- Plan 5: 40 years after the April you were first due to repay
- Postgraduate loan (Plan 3): 30 years after the April you were first due to repay
Loans can also be cancelled earlier if you die, or can no longer work due to permanent disability.
This means many borrowers, particularly those on lower or moderate incomes, may never repay the full amount.
Can you claim a refund for overpaying?
The Student Loans Company (SLC) may owe you a refund if you’ve repaid more than necessary.
There are four main reasons this can happen:
- Over-repayment: you’ve cleared your loan, but repayments continued from your salary. These are usually spotted and refunded automatically.
- Below-threshold repayments: deductions were taken correctly during high-earning months, but your total income for the tax year didn’t exceed the annual repayment threshold.
- Wrong repayment plan: your employer put you on the wrong plan, resulting in higher monthly deductions than required.
- Early repayments: you started repaying before you were due to, typically before the April after your course ended.
In the 2023-24 tax year, more than 216,000 borrowers received refunds, with an average payout of £280.
That included more than 102,000 people refunded because their annual income fell below the threshold, and nearly 60,000 who had repayments taken after their loan was fully paid.
Thousands more were affected by early repayments or incorrect plan types.
If you’re nearing the end of your loan, switching to direct debit can help prevent overpaying.
For below-threshold repayments, you can now request a refund via your SLC online account.
Other types of refund must be claimed by calling the SLC on 0300 100 0611 (or +44 141 243 3660 from overseas).
