Finance⏱ 5 min read
How to Calculate UK Student Loan Repayments
UK student loans work like a graduate tax. Most borrowers never repay the full balance. Here is the calculation that most graduates never do.
The UK student loan system is structured so repayments behave more like a graduate tax than a conventional loan. Understanding the real maths changes the perceived cost dramatically.
Plan 2 Repayment Calculation
Repayment: 9% of income above threshold
Plan 2 threshold (2024/25): £27,295/year
Monthly repayment = (Annual salary - £27,295) x 9% / 12
At £35,000: (35,000-27,295) x 0.09 / 12 = £57.79/month
At £25,000 (below threshold): £0/month
The amount NEVER depends on loan size -- only income.
The Write-Off Calculation
Plan 2: written off after 30 years from April after graduation.
Plan 5 (2023+ starters): written off after 40 years, threshold £25,000.
IFS analysis: average Plan 2 graduate repays ~30-50% of nominal balance.
Most graduates will never fully repay -- the rest is written off.
High earners (£70,000+) are most likely to repay in full.
Should You Overpay?
Overpaying only benefits you if you will repay the full balance before write-off.
For most £35,000-£55,000 earners on Plan 2:
The loan will be partially written off regardless.
Overpaying reduces the amount forgiven -- no financial benefit.
Exception: Plan 5 with 40-year term -- higher earners should model carefully.