Key Stage: KS5
Year group: Year 12 / Year 13
Age range: 16–18
Duration: 50 minutes
Subject: PSHE / Economics / Citizenship
Cost: Free

Learning aim

Students can explain how Plan 5 student loans work, calculate annual repayment for a given salary, and articulate why most Plan 5 borrowers will not benefit from voluntary overpayment.

CURRICULUM National Curriculum links

PSHE Association KS5 H30: long-term financial planning, including knowing how to manage debt
Citizenship KS5: the role of public-service borrowing and individual obligations
Economics A-Level: government finance, the difference between graduate tax models and conventional debt
Maths A-Level: percentage calculation in financial contexts; compound vs simple interest

RESOURCES What you'll need

Plan 5 mechanics handout (threshold, rate, write-off horizon, interest formula)
Calculator
Three earnings scenarios: £28k starter, £45k mid-career, £70k high earner
Mini-whiteboards
UK Tax Drag's full student loans guide for teacher prep

LESSON Lesson structure (50 minutes)

Opening
HOOK

Project this real claim: "I'm on Plan 5 and I'm going to overpay aggressively to clear it as fast as possible." Ask students: who agrees? Take 3-4 quick opinions. We'll come back to this in the plenary.

Direct teach
TEACH

Define Plan 5: applies to undergraduates in England starting from August 2023. Key parameters for 2026/27: threshold £25,000/year, repayment rate 9% above threshold, write-off at 40 years from first April liable. Interest at RPI only. So below threshold = pay nothing. Above threshold = repay 9% of every pound earned above £25,000.

Pupils apply
GUIDED

Class calculates annual repayments for three scenarios. (a) £28,000 salary: (28,000 − 25,000) × 9% = £270/year. (b) £45,000 salary: (45,000 − 25,000) × 9% = £1,800/year. (c) £70,000 salary: (70,000 − 25,000) × 9% = £4,050/year. Pupils show working on mini-whiteboards.

Stretch / depth
CHALLENGE

Project this scenario: graduate takes a £60,000 loan at uni. Stays at the £45,000 salary average above. Over 40 years they repay £1,800 × 40 = £72,000 in nominal terms. Write-off happens at year 40. Do they "save" by overpaying? Answer: NO. Because the loan writes off at year 40 anyway, overpayment is paying voluntary tax. The "I want it gone faster" instinct is psychologically real but financially wrong for most Plan 5 borrowers.

Close
PLENARY

Return to the opening claim. Take a class vote: should our hypothetical Plan 5 borrower overpay? Discuss. Land on: only the small minority of high-earning, full-career borrowers who would clear the loan in <40 years anyway should consider it. For most: treat it like a graduate tax.

DIFFERENTIATION Adapting for all learners

Support (working below ARE)

Pre-fill the calculation template — pupils only complete the final multiplication step. Allow calculator. Focus on understanding the threshold concept rather than fast arithmetic.

Stretch (working above ARE)

Pupils compute interest accrued vs repayments made over the first 5 years at £30k salary, demonstrating that the balance can GROW despite paying. Then discuss what this means for the "graduate tax" mental model.

SEND SEND adaptations

For pupils with dyscalculia: provide a step-by-step decision flowchart — "Earnings < £25,000? → pay £0. Earnings ≥ £25,000? → repayment = (earnings − £25,000) × 9%." For pupils with autism: provide a visual timeline showing the 40-year horizon and key milestones.

EAL EAL support

Vocabulary: "threshold", "marginal rate", "income-contingent", "write-off horizon", "graduate tax". Sentence frames: "If I earn £___, my annual loan repayment is £___." "Plan 5 writes off after ___ years."

ASSESSMENT Assessment criteria

Pupils can: (1) state the Plan 5 threshold and rate; (2) calculate Plan 5 repayment for any salary; (3) explain the 40-year write-off mechanism; (4) articulate why most Plan 5 borrowers should not voluntarily overpay.

HOME Homework pack

Three activities consolidating Plan 5 mechanics. ~30 minutes.

Calculation set

What pupils do: Calculate Plan 5 annual repayment for these salaries: (a) £24,000, (b) £30,000, (c) £42,000, (d) £58,000.

Expected output: 4 calculations with working.

Marking guidance: 2 marks per accurate answer. 8 marks total.

Comparison essay

What pupils do: In 200 words, compare Plan 5 (40-year write-off) with Plan 2 (30-year write-off). Which is "better" for graduates? Justify with reference to typical career-earnings paths.

Expected output: 200-word structured response.

Marking guidance: 6 marks — 2 for accurate mechanics, 2 for analysis, 2 for justified conclusion.

Real-world decision

What pupils do: A 24-year-old graduate has a £45,000 Plan 5 balance. They've been left £30,000 in a will. Should they pay off the student loan, put it in a stocks-and-shares ISA, or save for a house deposit? Justify your recommendation.

Expected output: 300-word recommendation with reasoning.

Marking guidance: 8 marks — 3 for accurate Plan 5 understanding, 3 for considered analysis of alternatives, 2 for clear recommendation.

SAFEGUARDING Classroom safeguarding

Note for teachers: Do not ask pupils about their own family's tax band, salary, or income. Frame all examples through fictional salaries. Be aware some pupils may be unsure of family financial circumstances — focus on the public-spending side of the lesson, not personal income.

ANSWERS Answer key & differentiation

Answer guide

Guided scenarios (check on whiteboards): £28,000 → (£3,000 × 9%) = £270/year; £45,000 → (£20,000 × 9%) = £1,800/year; £70,000 → (£45,000 × 9%) = £4,050/year.
Homework "Calculation set": (a) £24,000 → £0 (below the £25,000 threshold — award full marks only if pupils say why); (b) £30,000 → £5,000 × 9% = £450/year; (c) £42,000 → £17,000 × 9% = £1,530/year; (d) £58,000 → £33,000 × 9% = £2,970/year.
"Comparison essay" full-mark ingredients: Plan 2 (2012–2023 starters) has the higher threshold (£29,385 in 2026/27) and a 30-year write-off but interest up to RPI+3%; Plan 5 has the lower £25,000 threshold, RPI-only interest, and a 40-year horizon. For typical earners Plan 5 costs more over a lifetime (repaying sooner, for ten years longer); only consistently high earners can come out ahead on Plan 5 because RPI-only interest lets them clear the balance with less total interest. Any justified conclusion earns the analysis marks.
"Real-world decision" model reasoning: for most graduates, do NOT pay the £30,000 against the £45,000 Plan 5 balance — repayments depend on earnings, not balance; the debt writes off at year 40; and prepayment is irreversible. Stronger uses: first-home deposit via a LISA (£4,000/year + 25% bonus) and/or a stocks-and-shares ISA. Credit the exception: a pupil who argues for repayment on a definite high-earnings path (would clear well inside 40 years) and shows the interest saved.

Support (scaffold)

Keep the two-question flowchart in front of pupils: under £25,000 → £0; over → (salary − £25,000) × 9%. All four homework answers fall out of it.
Use £1,000-step number lines from £25,000 so the "amount above the threshold" is counted, not calculated.
Sentence frame: "Only the money above £25,000 is touched — the first £25,000 is never touched."

Stretch (challenge)

Balance-growth demo at £30,000 salary: repayments £450/year vs interest at RPI (~3%) on a £50,000 balance ≈ £1,500/year — the balance grows by ~£1,000+ a year while paying, which is exactly why the "graduate tax" mental model fits better than "debt".
Find the break-even: at what salary do repayments equal £1,500 interest on £50,000? (£25,000 + £1,500/0.09 ≈ £41,700.)
Compare with the stretch scenario in class: £1,800 × 40 = £72,000 repaid on a £60,000 loan — yet overpaying early would still have cost more than letting the write-off land. Ask pupils to explain the apparent paradox (money repaid later is cheaper in real terms; overpayment removes the write-off option).

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