Plan 2 vs Plan 5 Student Loans
Compare the differences between Plan 2 (pre-2023) and Plan 5 (post-2023) student loans in England and understand how they impact your repayments.
In 2023, the UK government introduced Plan 5 loans for new English students, replacing the previous Plan 2 system. These changes significantly altered how student loans work for those starting university from the 2023/24 academic year onwards. If you're trying to understand the differences between these two plans, this guide will help you compare them side by side.
Whether you're a Plan 2 borrower wondering how the new system differs, or you're making decisions about university education and want to understand the financial implications, this comparison covers the key differences that matter to your finances.
Key Differences at a Glance
| Feature | Plan 2 (pre-2023) | Plan 5 (post-2023) |
|---|---|---|
| Repayment Threshold | £27,295 per year | £25,000 per year |
| Interest Rate During Study | RPI + 3% | RPI only |
| Interest Rate After Graduation | RPI to RPI + 3% (income-dependent) | RPI only |
| Repayment Rate | 9% of income above threshold | 9% of income above threshold |
| Loan Term (Write-Off Period) | 30 years from April after graduation | 40 years from April after graduation |
What These Differences Mean For You
Higher Monthly Repayments with Plan 5
With a lower repayment threshold (£25,000 vs £27,295), Plan 5 borrowers will start repaying their loans earlier and will pay more each month than Plan 2 borrowers on the same salary. For example:
- On a £30,000 salary: Plan 2 repayments would be about £20 per month, while Plan 5 would be about £37 per month - a difference of £17 monthly.
Simplified Interest Rate for Plan 5
Plan 5 has a simpler interest rate structure - it's always just RPI, regardless of whether you're studying or your income level after graduating. This contrasts with Plan 2's variable rates that increase with income levels (up to RPI + 3%). This means:
- For high earners, Plan 5 interest rates are lower than Plan 2
- For low to middle earners, Plan 5 rates may be similar or slightly lower
- The simplified structure makes it easier to predict interest accumulation
Longer Repayment Period with Plan 5
Perhaps the most significant change is the loan term extension from 30 to 40 years. This means Plan 5 borrowers will be making repayments for up to 10 years longer than Plan 2 borrowers. For many graduates, this extends the repayment period well into their 50s or 60s.
Who Benefits from Each Plan?
Plan 2 may be better for:
- Those who expect moderate lifetime earnings (earlier write-off helps)
- Those who don't want to make repayments into their 50s and 60s
- Those who benefit from the higher repayment threshold
Plan 5 may be better for:
- High earners who will pay off their loan entirely (simpler interest rate helps)
- Those who borrow larger amounts (longer repayment period allows more time to repay)
Compare Your Repayments
See how these differences affect your personal situation with our calculator