Plan 5 Student Loans Explained
Plan 5 applies to students starting undergraduate courses in England from August 2023. In the 2026/27 tax year, the repayment threshold is £25,000, interest is linked to RPI only, and the write-off period is 40 years.
Last updated: 10 May 2026
What is Plan 5 student loan?
Plan 5 is the student loan repayment plan for eligible undergraduate students in England who started from August 2023. In the 2026/27 tax year, you repay 9% of earnings above £25,000, interest is linked to RPI only, and any balance left after 40 years is written off.
Threshold
£25,000
per year
Repayment Rate
9%
above threshold
Interest Rate
RPI only
~3.2%
Write-off
40 years
Who Has a Plan 5 Loan?
You have a Plan 5 loan if you:
- Started an undergraduate course in England from 1 August 2023
- Started an Advanced Learner Loan course in England from 1 August 2023
✅2024/25 freshers and beyond
All undergraduate students in England starting from August 2023 are on Plan 5, the default plan for new English students.
How Plan 5 Differs from Plan 2
Plan 5 was introduced following the Augar Review recommendations. Here are the key differences:
| Plan 5 (New) | Plan 2 (Previous) | |
|---|---|---|
| Threshold | £25,000 | £29,385 |
| Interest Rate | RPI only (~3.2%) | RPI + 0-3% (up to 6.2%) |
| Write-off Period | 40 years | 30 years |
| Repayment Rate | 9% | 9% |
Is Plan 5 Better or Worse?
It depends on your situation. Here's a balanced view:
✓ Plan 5 Advantages
- Lower interest (RPI only, no +3%)
- Debt grows more slowly
- Higher earners pay less interest
- More likely to repay in full
✗ Plan 5 Disadvantages
- Lower threshold = earlier repayments
- 40 year term (vs 30 years)
- Start paying on £25k, not £28k
- Paying longer overall
Who benefits most? Higher earners tend to benefit from Plan 5 because of the lower interest rate. Lower earners may pay more overall due to the longer term and lower threshold.
How Plan 5 Repayments Work
Like other plans, Plan 5 repayments are automatically deducted by your employer through PAYE.
Repayment Calculation
You pay 9% of everything you earn above £25,000 per year.
Example:
If you earn £35,000 a year, your monthly repayment would be:
(£35,000 - £25,000) × 9% ÷ 12 = £75/month
Compare: A Plan 2 borrower on the same salary would pay £42 a month. Plan 5 borrowers pay more due to the lower threshold.
Interest Rate: Plan 5 vs Plan 2
The most significant change in Plan 5 is the simpler, lower interest rate:
Plan 5 Interest = RPI Only
Unlike Plan 2's complex sliding scale (RPI to RPI + 3%), Plan 5 charges just RPI, currently around 3.2%.
This means your debt won't grow as quickly, and higher earners especially benefit since they no longer face the punishing RPI + 3% rate that Plan 2 charges.
40-Year Write-Off Period
Plan 5 loans are written off after 40 years, which is 10 years longer than Plan 2.
What this means:If you graduate at 21, your loan wouldn't be written off until you're 61 or 62. For many people, this means repaying until close to retirement age.
The government's rationale is that with lower interest, more graduates will actually repay their loans in full rather than relying on write off.
Should You Overpay Your Plan 5 Loan?
With Plan 5's lower interest rate, the overpayment calculation is different from Plan 2:
✓ Overpaying Makes More Sense If:
- You expect to repay in full anyway
- Interest rate is above savings rates
- You have spare cash after pension
- No higher-interest debts
✗ Be Cautious If:
- Career earnings are uncertain
- May not repay in 40 years anyway
- Could invest at higher returns
- Pension not fully funded
Related Pages
Plan 5 Student Loan FAQ
- What is Plan 5 student loan?
- Plan 5 is the repayment plan for students who started eligible undergraduate courses in England from August 2023. You repay 9% of earnings above the threshold, interest is linked to RPI only, and any remaining balance is written off after 40 years.
- What is the Plan 5 repayment threshold?
- The Plan 5 repayment threshold is £25,000 a year in the 2026/27 tax year. You only repay 9% on the part of your income above that amount.
- Is Plan 5 interest lower than Plan 2?
- Yes. Plan 5 uses an RPI-only interest rate, while Plan 2 can charge up to RPI plus 3%. That makes Plan 5 simpler and often cheaper on interest for higher earners.
- Is Plan 5 better or worse than Plan 2?
- Plan 5 has lower interest than Plan 2, but it also has a lower repayment threshold and a longer 40 year write-off. Higher earners often benefit from the lower interest, while middle and lower earners can repay for longer.