Plan 2 vs Plan 5 Student Loans
Compare the differences between pre-2023 and post-2023 student loan plans
Last updated:
Key Differences at a Glance
| Feature | Plan 2 | Plan 5 | Better Option |
|---|---|---|---|
| Who has it | Students starting between 2012-2023 | Students starting from Sept 2023 | N/A (based on when you studied) |
| Repayment Threshold | £27,295 per year | £25,000 per year | Plan 2 (higher threshold means less monthly repayment) |
| Interest Rate | RPI to RPI + 3% (varies by income) | RPI only (regardless of income) | Plan 5 (lower interest means less debt growth) |
| Write-off Period | 30 years | 40 years | Plan 2 (shorter period means debt cleared sooner) |
| Monthly Payment (on £35,000 salary) | £58 per month | £75 per month | Plan 2 (lower monthly payments) |
Source: Student Finance England (January 2024)
Note: Which plan is "better" depends on your individual circumstances, particularly your expected career earnings. Low to middle earners typically pay more under Plan 5, while high earners may benefit from its lower interest rates.
Why Trust This Comparison?
- Based on official UK loan plans
- Regularly updated with latest rates
- Data-driven comparison
Detailed Comparison
Repayment Thresholds
Plan 2 has a higher repayment threshold (£27,295) compared to Plan 5 (£25,000). This £2,295 difference means:
- Plan 5 borrowers start repaying at lower income levels
- At the same salary, Plan 5 borrowers repay more each month
- For someone earning £30,000, the difference is £17 more per month under Plan 5
The lower threshold is one of the key changes designed to make the student loan system more financially sustainable for the government, but it puts a higher burden on lower and middle-income graduates. You can calculate your exact monthly repayments using our Plan 2 calculator or Plan 5 calculator.
Interest Rates
The interest rate structure is significantly different between the two plans:
| Circumstance | Plan 2 Interest | Plan 5 Interest |
|---|---|---|
| While studying | RPI + 3% | RPI only |
| After graduation, earning under threshold | RPI only | RPI only |
| Earning between threshold and £49,130 | RPI to RPI + 3% (sliding scale) | RPI only |
| Earning over £49,130 | RPI + 3% | RPI only |
Source: Student Finance England Interest Rates (Academic year 2023-24)
The lower interest rate for Plan 5 loans is one of its biggest advantages, particularly for higher earners. This means:
- Plan 5 loans accrue significantly less interest over time
- Higher earners on Plan 5 will see their balance grow much more slowly
- The total amount repaid by high earners may be less under Plan 5, despite the lower threshold
For a complete explanation of how interest works on student loans, read our student loan interest rates guide. You can also use our interest calculator to see how interest affects your specific loan balance.
Write-off Period
Plan 2 loans are written off 30 years after you become eligible to repay, while Plan 5 loans are written off after 40 years - a full decade longer.
This extended period means:
- Plan 5 borrowers will be repaying until their 60s in many cases
- More Plan 5 borrowers will fully repay their loans before write-off
- The total amount repaid over a lifetime could be significantly higher for some Plan 5 borrowers
Use our write-off calculator to check when your loan will be cancelled and how much you'll have paid by then.
Example: Low to Middle Earner (£30,000 with 2% annual growth)
- Plan 2: Would repay approximately £22,000 over 30 years before write-off
- Plan 5: Would repay approximately £37,000 over 40 years before write-off
- Difference: Plan 5 costs about £15,000 more over the lifetime of the loan
Based on our own calculations using official repayment thresholds and interest rates
Example: High Earner (£50,000 with 3% annual growth)
- Plan 2: Would repay approximately £83,000 (including significant interest)
- Plan 5: Would repay approximately £65,000 (with lower interest)
- Difference: Plan 5 saves about £18,000 due to the lower interest rate
Based on our own calculations using official repayment thresholds and interest rates
Disclaimer:
This guide provides general information based on current student finance policies. Individual circumstances may vary. The information was accurate at the time of publication but is subject to change.
Who Benefits From Each Plan?
Better Off With Plan 2
- Low to Middle Earners: Those who won't repay the full loan amount benefit from Plan 2's higher threshold and earlier write-off
- Career Breakers: Those planning career breaks or part-time work will benefit from the shorter 30-year term. Learn more about student loans during parental leave.
- Those Prioritizing Short-Term Cash Flow: The higher repayment threshold means keeping more of your monthly salary
- Those Planning Early Retirement: The earlier write-off means being debt-free earlier in life
Better Off With Plan 5
- High Earners: Those expecting to fully repay their loan will benefit from the lower interest rates
- Rapid Career Progressers: Those whose salary will grow quickly enough to fully repay within the term
- Those Planning to Overpay: Lower interest makes voluntary overpayments more effective
- Those Concerned About Interest Accumulation: Plan 5's fixed RPI rate prevents the higher interest rates of Plan 2 at higher incomes
Compare Your Personal Repayments
Use our calculator to see exactly how each plan would affect you based on your expected salary
More Tools and Resources
Sources & References
- 1.Student Loan Repayment
GOV.UK
- 2.
- 3.Student Loan Repayment Thresholds and Interest Rates
Student Finance England
Our content is based on the latest information from official UK government sources. The calculators use current repayment thresholds and interest rates as defined by Student Finance England and equivalent bodies.