What this guide covers
If you start an undergraduate degree from 2023 onwards, you're on Plan 5. You repay 9% of earnings above £25,000, the loan is written off after 40 years, and the interest is now just RPI (no plus-up). For most graduates, treating it like a graduate tax — not a debt — leads to better decisions.
What you actually borrow
UK student finance is in two parts. Tuition fee loan covers your course fees — up to £9,535 a year in England for 2026/27 (Northern Ireland, Wales and Scotland have different caps and grant mixes). Maintenance loan covers living costs — somewhere between roughly £4,000 and £14,000 a year depending on where you live and your household income.
You don't see the cash for the tuition fee — it goes straight from the Student Loans Company to the university. You do see the maintenance loan in your account, three times a year at the start of each term.
How repayment really works (the most important page in this guide)
Plan 5 repayment is not like a mortgage or a credit card. It works more like a tax bracket that only applies to graduates.
- You repay 9% of everything you earn above £25,000 a year.
- If you earn under £25,000, you pay £0.
- If you lose your job, repayments stop automatically.
- After 40 years, whatever's left is wiped. You don't pay it.
- You can't be chased for missed payments — repayments come out of payroll automatically, like income tax.
Worked example. You start your career on £28,000.
| Your salary | Amount over £25k | Annual repayment (9%) | Monthly |
|---|---|---|---|
| £22,000 | £0 | £0 | £0 |
| £28,000 | £3,000 | £270 | £22.50 |
| £35,000 | £10,000 | £900 | £75 |
| £45,000 | £20,000 | £1,800 | £150 |
| £60,000 | £35,000 | £3,150 | £262.50 |
Interest on Plan 5 — better than older plans
Plan 5 charges interest at RPI (Retail Prices Index) only. Older plans (Plan 1, Plan 2) added up to 3% on top of RPI in some cases. Plan 5 doesn't.
That matters because for many graduates, the interest never affects the total you actually repay. Repayments are capped at 9% of income above £25k, and the loan is wiped at 40 years regardless of balance. The higher the interest rate, the more likely you are to be repaying for the full 40 years rather than clearing the debt early. But the monthly amount doesn't change.
Should I take the loan? Even if my family can pay?
This is a personal-finance question, not a money-advice one. But here are the things to weigh:
- Cash flow. If your family pays the fees up-front, you tie up £30,000+ now. If you take the loan, that £30,000 stays as savings/investments earning a return.
- Insurance. If you become ill, change career, take time out for caring, or earn under £25k, you repay nothing. Cash already paid up-front can't come back.
- Lifetime expected repayments. For a high-earning graduate who repays the full debt early, the loan is more expensive than paying cash. For a typical graduate, it isn't.
- Mortgage applications. Lenders do consider student loan repayments when working out how much you can borrow. But they consider the monthly repayment, not the balance. So overpaying doesn't help your mortgage application.
For most students, the answer is "take the full loan, treat the repayment as a graduate-tax line on your payslip, don't overpay."
Three things to double-check before applying
- Household income. Your maintenance loan is partly means-tested on your parents' income. Get them to provide it via the official online service — guessing can leave you with a smaller loan than you're entitled to.
- The deadline. Apply early in summer for an autumn course. Late applications get processed, but the first payment can land weeks after Freshers' Week, which is stressful.
- Welsh / Scottish / NI students. Your system is different — there are grants on top of loans that don't need repaying. Search "student finance" plus the country at gov.uk.
National Curriculum links
- England — PSHE Association KS4 L17 (financial responsibility), L18 (long-term financial planning)
- England — Citizenship KS4 (operation of the economy, public services)
- England — Maths KS4 (percentages, financial mathematics)
- Wales — Curriculum for Wales Progression Step 5 (HWB AoLE, Maths & Numeracy AoLE)
- Scotland — Curriculum for Excellence MNU 4-09a (financial education), HWB 4-21a
- NI — LLW KS4 Personal Finance
Full mapping in the curriculum map.
UK Tax Drag (2026). Student finance explained — Plan 5 and what you really repay. Ages 16–18 deep guide. Available at: https://kids.uktaxdrag.co.uk/ages-16-18-student-finance-explained.html
Curriculum mapping: see UK Financial Education Curriculum Map (Version 1.0).