Plan 2 vs Plan 4 Student Loans
Comparing undergraduate and postgraduate UK student loan repayment plans
Key Differences at a Glance
| Feature | Plan 2 | Plan 4 |
|---|---|---|
| Who has it? | Undergraduate students who started between Sept 2012 and Aug 2023 in England/Wales | Postgraduate loan borrowers in England/Wales (from 2016 onwards) |
| Loan Type | Undergraduate tuition and maintenance | Postgraduate Master's loan |
| Repayment Threshold | £27,295 per year | £21,000 per year |
| Repayment Rate | 9% of income above threshold | 6% of income above threshold |
| Interest Rate | Variable from RPI to RPI+3% depending on income | Variable from RPI to RPI+3% depending on income |
| Write-off Period | 30 years after graduation | 30 years after graduation |
| Maximum Loan Amount | £40,000-£60,000 (varies by course length) | Up to £12,167 (2024/25) |
Plan 2 and Plan 4 serve different purposes in the UK student loan system. Plan 2 covers undergraduate tuition fees and maintenance, while Plan 4 provides additional funding for postgraduate Master's degrees. Many graduates find themselves repaying both plans simultaneously, which is an important consideration when planning your finances.
Repayment Comparison
Understanding how Plan 2 and Plan 4 differ in repayment structure is crucial, especially if you have both loans. Plan 4 has a lower threshold (£21,000) but a lower repayment rate (6%), while Plan 2 has a higher threshold (£27,295) but a higher rate (9%).
Monthly Repayment Comparison
| Annual Salary | Plan 2 Monthly Repayment | Plan 4 Monthly Repayment | Combined Total |
|---|---|---|---|
| £25,000 | £0 | £20.00 | £20.00 |
| £30,000 | £20.29 | £45.00 | £65.29 |
| £35,000 | £57.79 | £70.00 | £127.79 |
| £40,000 | £95.29 | £95.00 | £190.29 |
| £50,000 | £170.29 | £145.00 | £315.29 |
| £60,000 | £245.29 | £195.00 | £440.29 |
Key Takeaway on Combined Repayments
If you have both Plan 2 and Plan 4 loans, you'll make repayments on both simultaneously once your income exceeds each threshold. This means:
- Plan 4 repayments start at £21,000 annual salary (6% above threshold)
- Plan 2 repayments start at £27,295 annual salary (9% above threshold)
- Above £27,295, you'll pay both loans simultaneously
- Combined rate above £27,295 is effectively 15% (9% + 6%) on income above £27,295, plus the Plan 4 contribution on the £21,000-£27,295 band
- At £40,000 salary, combined repayments are £190.29 per month (£2,283.48 per year)
Important for Postgraduate Students
If you completed an undergraduate degree with a Plan 2 loan and then took out a Plan 4 loan for postgraduate study, you'll be repaying both loans simultaneously. This significantly increases your monthly repayment obligations once you earn above the Plan 2 threshold. Factor this into your career planning and budget accordingly.
When to Consider a Postgraduate Loan
A Plan 4 postgraduate loan can be a valuable investment in your career, but it's important to consider the financial implications, especially if you already have a Plan 2 undergraduate loan.
Good reasons to take Plan 4
- Your Master's will significantly increase earning potential
- Required for your chosen career path (e.g., teaching, social work)
- Lower repayment rate (6%) makes it more manageable than Plan 2
- Same 30-year write-off period as Plan 2
- Smaller loan amount than undergraduate (max £12,167)
Consider carefully if
- You already have a large Plan 2 loan balance
- Expected salary increases won't justify the cost
- You could fund the Master's through savings or employer sponsorship
- Combined 15% repayment rate would strain your budget
- Your career doesn't require a postgraduate qualification
Calculate Your Repayments
Use our calculators to see exactly how much you'll repay on your specific loan plan