Plan 4 vs Plan 5 Student Loans Comparison

Plan 4 and Plan 5 are two different student loan plans in the UK, with Plan 4 applying to Scottish students and Plan 5 being the newest plan for English and Welsh students who started university from September 2023 onwards. While both are income-contingent loans, they have key differences that can significantly impact your repayments over time.

This comparison guide helps you understand these differences and what they mean for your finances, whether you’re deciding which country to study in or simply want to understand the differences between the plans.

Lower Monthly Repayments with Plan 4

With a higher repayment threshold of £27,660 (compared to £25,000 for Plan 5), Scottish Plan 4 loans result in lower monthly repayments for the same salary level. For example:

• On a £30,000 salary: Plan 4 repayments are about £17/month, while Plan 5 is about £37/month.

Lower Interest with Plan 4

Plan 4 uses the lower of either RPI or Bank Rate + 1%, which is often more favourable than Plan 5’s RPI-only calculation.

Earlier Loan Write-Off with Plan 4

Any remaining balance on Plan 4 is written off after 30 years (versus 40 years on Plan 5), meaning 10 fewer years of potential repayments.

For Most Students, Plan 4 Is More Favourable

Thanks to the higher threshold, potentially lower interest, and earlier write-off, Plan 4 is typically more financially advantageous than Plan 5. That said, your career path, salary growth, and total borrowing will determine your actual lifetime cost.