Plan 2 Student Loans
Complete guide to post-2012 student loans in England and Wales
Plan 2 Loan at a Glance
Who has Plan 2?
Students who started university between September 2012 and August 2023 in England or Wales.
Repayment Threshold
£27,295 per year (£2,274 monthly, £524 weekly)
Repayment Rate
9% of income above the threshold
Interest Rate
While studying: RPI + 3%
After graduation: Variable based on income, between RPI and RPI + 3%
Written Off
30 years after the April after graduation
When Repayments Start
The April after leaving your course, and only when income is above the threshold
How Plan 2 Student Loans Work
Plan 2 student loans were introduced in September 2012 when tuition fees in England rose to up to £9,000 per year. These loans cover both tuition and maintenance (living costs) for eligible students. If you started your course after 2023, you'll be on the newer Plan 5 system instead.
Key Features of Plan 2 Loans
Unlike commercial loans, student loan repayments are income-contingent, meaning you only repay when your income is above the threshold. This system functions more like a graduate tax than a traditional loan, as explained in our comprehensive student loans guide:
- Repayments are automatically deducted from your salary through PAYE
- The amount you repay depends on how much you earn, not how much you borrowed
- The loan is written off after 30 years, regardless of how much has been repaid
- Missing repayments due to low income does not affect your credit score
Calculating Plan 2 Repayments
You repay 9% of your income above the threshold of £27,295 per year. For example:
Annual salary: £32,000
- Income above threshold: £32,000 - £27,295 = £4,705
- 9% of £4,705 = £423.45 per year
- Monthly repayment: £35.29
Use our Plan 2 calculator to work out your exact monthly repayments based on your salary.
Plan 2 Interest Rates
Plan 2 has variable interest rates depending on your circumstances (for a detailed explanation, see our student loan interest guide):
| Circumstance | Interest Rate |
|---|---|
| While studying | RPI + 3% |
| Earning under £27,295 | RPI |
| Earning between £27,295 and £49,130 | RPI to RPI + 3% (sliding scale) |
| Earning over £49,130 | RPI + 3% |
Current RPI (Retail Price Index) is subject to change. As of 2023, it stands at approximately 2.6%. This complex interest structure is one of the main differences when comparing Plan 2 vs Plan 5 loans.
How Plan 2 Compares to Other Loan Plans
| Feature | Plan 1 | Plan 2 | Plan 5 |
|---|---|---|---|
| Who has it | Pre-2012 students | 2012-2023 students | Post-2023 students |
| Repayment Threshold | £22,015 | £27,295 | £25,000 |
| Interest Rate | Lower of RPI or Bank Rate + 1% | RPI to RPI + 3% | RPI + 0% |
| Written Off After | 25 years | 30 years | 40 years |
For most graduates, the biggest differences between these plans are the repayment thresholds and interest rates. For a detailed analysis of how these differences affect total repayments, see our Plan 2 vs Plan 5 comparison or Plan 1 vs Plan 2 comparison.
Key Considerations for Plan 2 Borrowers
Will You Repay in Full?
Around 80% of Plan 2 borrowers aren't expected to fully repay their loans before the 30-year write-off period. The likelihood of repaying in full depends on:
- Your starting salary and career progression
- Your total loan amount (including interest)
- Any career breaks or periods of lower income
Use our lifetime loan cost calculator to estimate whether you'll repay your loan in full.
Should You Make Extra Payments?
For most Plan 2 borrowers, making voluntary extra payments isn't financially advantageous. This is because:
- If you're unlikely to repay in full, extra payments just reduce the amount that would be written off
- The money might provide better returns if invested elsewhere
- Unlike other debts, student loans don't affect your credit score
However, if you're a high earner who will repay in full, making extra payments could save you money in the long run by reducing interest. For a detailed analysis, read our guide on whether you should overpay your student loan.
Frequently Asked Questions
Can I pay off my Plan 2 loan early?
Yes, you can make voluntary repayments at any time. However, for many graduates, it may not be financially advantageous to pay off early, especially if you\'re unlikely to repay the full amount before the 30-year write-off. Use our overpayment calculator to see if this makes sense for you.
What happens to my Plan 2 loan if I move abroad?
If you move abroad, you\'ll still be responsible for repaying your student loan. You\'ll need to inform the Student Loans Company of your move and provide evidence of your income. The repayment threshold will be adjusted based on the cost of living in your new country of residence. See our guide to repaying student loans abroad for more information.
Does my Plan 2 loan affect my credit score?
No, your student loan does not appear on your credit file and does not affect your credit score. However, lenders may consider your student loan repayments when assessing your affordability for mortgages or other loans. For more on this topic, see our guide on student loans and mortgages.
Calculate Your Plan 2 Repayments
Use our calculator to see exactly how your Plan 2 loan will affect your monthly budget