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 would be about £17 per month, while Plan 5 would be about £37 per month.

Lower Interest with Plan 4

Currently, Plan 4 loans generally have lower interest rates. Plan 4 uses the lower of either RPI or Bank Rate + 1%, which has historically been more favorable than Plan 5's RPI-only calculation.

Earlier Loan Write-Off with Plan 4

A major advantage of Plan 4 is that any remaining loan is written off after 30 years, compared to 40 years for Plan 5. This means Plan 4 borrowers have 10 fewer years of potential repayments.

For Most Students, Plan 4 Is More Favorable

Due to the higher repayment threshold, potentially lower interest rates, and earlier write-off, Plan 4 (Scottish) loans are typically more financially advantageous than Plan 5 loans for most students.

However, your individual circumstances including career path, expected salary progression, and total borrowed amount will determine which plan ultimately costs you less over your lifetime.