Complete guide to UK postgraduate loans. How Master's and Doctoral loans interact with undergraduate debt, thresholds, and repayment strategies.
Postgraduate loans operate under completely different rules than undergraduate student loans, yet many people with both loans don't fully understand how they interact. If you've taken out a postgraduate Master's loan or a Doctoral loan, you're not on Plan 1, 2, 4, or 5. You're on a separate postgraduate loan system with its own threshold (£21,000), its own repayment rate (6%), and its own 30-year write-off period.
The complexity intensifies if you have both undergraduate and postgraduate loans. The two systems run in parallel, each with their own threshold and repayment rate. You can face combined deductions of 15% on income above the higher threshold (9% undergraduate plus 6% postgraduate). This creates marginal tax rates that can exceed 60% when combined with income tax and National Insurance, fundamentally changing how you should think about salary negotiations, career decisions, and financial planning.
What catches most postgraduate borrowers off-guard is the lower threshold. While undergraduate Plan 2 starts at £27,295, postgraduate repayments begin at just £21,000. For many Master's graduates, this means repayments start immediately upon entering even entry-level professional roles. A graduate entering teaching, social work, or junior management on £24,000 pays nothing on their undergraduate loan but pays £270 annually (£22.50 monthly) on their postgraduate loan.
Understanding postgraduate loan mechanics, how they combine with undergraduate loans, and how to optimize repayments across both requires careful attention to the specific rules that govern each loan type.
Postgraduate loans were introduced in 2016 for Master's degrees and 2018 for Doctoral degrees. They're available to help with the costs of postgraduate study, but unlike undergraduate loans, they're lump sum payments directly to you (not split between tuition and maintenance), and you decide how to use the money.
Unlike undergraduate loans where most people borrow similar amounts (maximum fees plus maintenance), postgraduate loan amounts vary enormously. Someone might borrow £5,000 to cover part of their fees while working, while another borrows the full £12,167 and uses it for both fees and living costs.
The 6% rate is lower than the 9% rate on undergraduate loans, but the much lower threshold (£21,000 vs £25,000-£27,295) means postgraduate repayments start earlier and affect more of your income.
The real complexity emerges when you have both undergraduate and postgraduate loans simultaneously. The two systems operate independently, each checking your income against their respective thresholds and applying their repayment rates.
If you have Plan 2 undergraduate (threshold £27,295) and postgraduate (threshold £21,000):
At £40,000 income, someone with both loans pays nearly £2,300 annually in student loan deductions. That's £190 per month coming out of their paycheck.
Once you're above both thresholds, you face a 15% marginal rate on additional income (9% undergraduate + 6% postgraduate). Combined with:
20% income tax + 12% NI + 9% undergrad + 6% postgrad = 47% marginal rate
40% income tax + 2% NI + 9% undergrad + 6% postgrad = 57% marginal rate
Nearly 60 pence of every additional pound earned goes to deductions if you're a higher rate taxpayer with both loans. This dramatically affects salary negotiation, bonus valuation, and career decisions.
Our Multiple Student Loans Combined Impact Calculator shows exactly what you'll pay with combined undergraduate and postgraduate loans at different income levels.
Postgraduate loan interest has two phases:
With RPI currently around 3-4%, postgraduate loan interest during repayment is approximately 6-7%, the same as Plan 2's maximum rate. This high interest rate means postgraduate loan balances often grow despite repayments, particularly for borrowers earning below £35,000.
Only at incomes above approximately £32,000 do repayments start meaningfully exceeding interest on even a modest £10,000 postgraduate loan balance. For larger balances, you need even higher income to make real progress.
The availability of postgraduate loans has made Master's degrees more accessible, but the debt implications are significant. The decision to borrow requires careful analysis.
If your target career requires a Master's degree (e.g., clinical psychology, certain engineering specializations, teaching in some subjects), the loan enables the necessary qualification.
If the Master's degree leads to roles paying £15,000-£25,000 more than you'd earn without it, the increased earnings justify the loan cost.
If you don't have savings, family support, or employer funding for the Master's, the loan might be your only route to the qualification.
If the Master's is "interesting" but doesn't clearly improve career prospects or earnings, you're borrowing £12,000+ for uncertain return.
If you have £50,000+ undergraduate debt that will likely be written off, adding £12,000 more starts a separate 30-year repayment journey. You're extending your repayment obligations and increasing monthly deductions.
If your field typically pays £25,000-£35,000, you'll make minimal progress against the postgraduate loan while paying on it for 30 years. Consider whether the qualification justifies the long-term cost.
Scholarships, employer sponsorship, part-time study while working, or using savings might be better options if available.
Run projections using our student loan calculator to estimate whether the likely salary increase from the Master's justifies the loan cost and extended repayment obligations.
Should you voluntarily overpay your postgraduate loan? The analysis differs from undergraduate loans due to different write-off likelihood.
Postgraduate loans have:
Someone borrowing £10,000 for a Master's who goes on to earn £45,000+ is likely to repay the postgraduate loan in full within 15-20 years. Write-off is less relevant than for undergraduate loans where balances are larger and earnings projections are more varied.
If you're earning £50,000+ and will clearly repay the postgraduate loan in full, overpaying saves the 6-7% interest. But compare this against pension contributions (with 20-45% tax relief), ISA investments (potentially higher returns), or mortgage overpayments.
If you have £2,000 remaining and can clear it easily, doing so eliminates the administrative hassle of tracking one more loan. But financially, letting it run through PAYE until naturally paid off is equivalent.
If you're earning £28,000-£38,000, your postgraduate loan balance might grow or stay flat for years due to interest exceeding repayments. Overpaying is risky because you might never repay in full even with overpayments.
If you have £50,000 undergraduate debt plus £10,000 postgraduate debt, focus on building wealth through pensions and savings rather than targeting either loan.
General recommendation: Even for postgraduate loans where full repayment is likely, pension contributions almost always provide better financial outcomes than overpayment due to tax relief and compound growth benefits.
Salary sacrifice creates particularly valuable benefits for borrowers with both undergraduate and postgraduate loans because it reduces both repayments simultaneously:
The £3,000 sacrifice saves £450 in student loans (15% of the sacrificed amount) plus tax and National Insurance savings. You're getting substantial benefit while building pension wealth.
For dual loan borrowers, salary sacrifice is even more valuable than for single loan borrowers because you're saving at the combined 15% rate.
Check our Pension Salary Sacrifice Effect Calculator to see exact savings for your situation.
Your tax code includes markers for student loans:
If you have both loans, your tax code should show both markers, something like: 1257L SL PGL
Your payslip should show separate lines for:
If your payslip only shows one deduction or doesn't differentiate between the two, contact your payroll department immediately. You might be underpaying one loan (creating arrears you'll owe later) or overpaying (if they're deducting at the wrong rate).
Always verify your deductions match the correct calculations. Errors with dual loans are more common than with single loans because payroll systems must handle two separate calculations.
Postgraduate loans have higher write-off likelihood than undergraduate Plan 1 but lower than undergraduate Plan 2:
The key variable is whether you're making meaningful progress against the balance. If your balance is decreasing by £500+ annually, you'll probably repay in full eventually. If it's flat or growing, write-off is likely.
Our Loan Write-Off Checker helps you assess write-off likelihood for both loans individually and combined.
Postgraduate loans require strategic thinking, particularly when combined with undergraduate debt:
Postgraduate loans add complexity to an already complex student loan system. But with understanding of how they work, how they combine with undergraduate loans, and how to optimize around the rules, you can manage them effectively while building wealth through other financial priorities. The dual loan burden is real, but it's manageable with the right strategy and shouldn't prevent you from achieving broader financial goals.
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.