Plan 5 vs Postgraduate Loans Comparison
Compare the latest English Plan 5 undergraduate loans with Postgraduate loans and understand how they work together.
For students pursuing further education after their undergraduate degree, understanding both Plan 5 (the newest undergraduate loan plan) and Postgraduate loans is essential. This is especially important as many students will have both loan types and will need to make concurrent repayments once they start working.
This guide compares these two loan types side by side and explains how they interact when you have both loans simultaneously.
Key Differences at a Glance
| Feature | Plan 5 (Undergraduate) | Postgraduate Loan |
|---|---|---|
| Repayment Threshold | £25,000 per year | £21,000 per year |
| Repayment Rate | 9% of income above threshold | 6% of income above threshold |
| Interest Rate | RPI only (both during and after study) | RPI + 3% |
| Loan Term (Write-Off Period) | 40 years from April after graduation | 30 years from April after graduation |
| Maximum Loan Amount (2023/24) | Up to £9,250 per year for tuition + maintenance loan | £12,167 total (Masters) / £27,892 total (Doctoral) |
| Payment Structure | Tuition fees paid to university, maintenance to student | Entire amount paid directly to student |
Combined Impact of Both Loans
If you have both a Plan 5 undergraduate loan and a Postgraduate loan, you'll make repayments towards both simultaneously once you're earning above their respective thresholds. This means:
- On income between £21,000 and £25,000: You'll pay 6% towards your Postgraduate loan only
- On income above £25,000: You'll pay 9% towards your Plan 5 loan AND 6% towards your Postgraduate loan, for a total of 15% of your income above £25,000 (plus the 6% on income between £21,000-£25,000)
Example Combined Repayment
For someone earning £30,000 with both loans:
- Postgraduate loan: 6% of (£30,000 - £21,000) = 6% of £9,000 = £540 per year (£45 monthly)
- Plan 5 loan: 9% of (£30,000 - £25,000) = 9% of £5,000 = £450 per year (£37.50 monthly)
- Total repayment: £990 per year (£82.50 monthly)
Interest Rate Differences
Your Postgraduate loan will accrue interest at a higher rate (RPI + 3%) compared to your Plan 5 loan (RPI only). This means that even if you're paying both off simultaneously, your Postgraduate loan balance will grow more quickly.
Different Write-Off Periods
An interesting quirk of having both loans is that they have different write-off periods:
- Your Postgraduate loan will be written off after 30 years
- Your Plan 5 undergraduate loan will continue for another 10 years, being written off after 40 years
This means that after 30 years, your monthly repayments would decrease as the Postgraduate portion (6%) would stop, leaving only the 9% Plan 5 repayment for the final 10 years.
Strategic Considerations
Should You Take Out Both Loans?
Given the 15% combined repayment rate, many students wonder if it's worth taking a Postgraduate loan on top of their existing undergraduate debt. Consider:
- Career advancement: If a postgraduate degree significantly increases your earning potential, the additional loan may be worthwhile despite the higher repayments
- Alternative funding: Explore scholarships, employer sponsorship, or part-time study options before adding to your loan burden
- Likelihood of repayment: If you're unlikely to repay either loan in full before the write-off date, the "paper" loan amount matters less than the monthly repayments
Voluntary Repayments
If you have spare funds and want to make voluntary repayments, consider:
- Targeting the Postgraduate loan first, as it has a higher interest rate (RPI + 3%)
- However, if you're unlikely to fully repay either loan, making extra payments may not be financially optimal
Calculate Your Combined Repayments
See exactly how both loans will affect your monthly income