Plan 2 Student Loan Repayment Threshold, Interest and Write-Off (2026-27)

Written by Student Loan Calculator UK Editorial Team, reviewed by Student Loan Calculator UK Editorial Team · 5 October 2026

The same loan goes by three names. Student Finance England or Student Finance Wales paid it out, so letters call it Plan 2 student finance; the HMRC starter checklist asks for your plan type, and the answer for this loan is plan type 2; your payslip shows a Plan 2 deduction. Plan 2 is one of five UK student loan plans. This page holds the rules and worked examples; for whether to overpay and how career moves change the sums, read the Plan 2 student loan strategy guide.

Who is on student loan repayment Plan 2?

Plan 2 covers English undergraduates who began an eligible higher-education course between 1 September 2012 and 31 July 2023, and Welsh undergraduates who began from 1 September 2012 onwards. Wales did not move to Plan 5, so a Welsh 2024 starter is on Plan 2. It is the largest UK student loan cohort by borrower count, with roughly 4 million active accounts according to SLC statistics. Most Plan 2 borrowers are now aged 21-32 and have been in repayment for between zero and ten years.

You are not on Plan 2 if you started before September 2012 (that is Plan 1), if you study in Scotland (Plan 4 via SAAS), if you are Northern Irish (still Plan 1), or if you started an English course from August 2023 onwards (Plan 5, which applies in England only). Plan 2 borrowers who later complete a Master's or PhD also receive a separate Postgraduate Loan (Plan 3) that stacks on top, so you repay both plans simultaneously through PAYE. Unsure? Work through what student loan plan am I on.

Plan 2 student loan repayment threshold (2026-27)

The Plan 2 student loan repayment threshold for 2026-27 is £29,385 annually. It was held at £27,295 from April 2021 to April 2025, rose to £28,470 in April 2025 and rose again to £29,385 in April 2026. The Autumn Budget 2025 announced a fresh freeze that holds Plan 2 at £29,385 from April 2027 to April 2030. Because wages rise with inflation, a frozen threshold is an effective stealth tax rise for Plan 2 borrowers.

Plan 2 interest rate

The Plan 2 interest formula is £29,385 or less: RPI (4.1%). £29,386 to £52,884: RPI plus a sliding 0% to 3%. £52,885 or more: RPI + 3% (7.1%), capped at 6% since 1 September 2026. While studying: RPI + 3%. While you are studying, interest is always RPI + 3% regardless of income. Once you finish, the rate is determined by your annual income: at £29,385 or below you pay RPI only (currently 4.1%); between £29,386 and £52,884 you pay RPI plus up to 3% on a sliding scale; at £52,885 or above you pay the full RPI + 3%. On top of that, the Department for Education capped Plan 2 and Postgraduate Loan interest at 6% from 1 September 2026 for the 2026/27 academic year, so the applicable Plan 2 rate is 6% (cap in force since 1 September 2026; would otherwise be 7.1%). Interest is calculated daily on the outstanding balance.

Plan 2 write-off rule

Plan 2 balances are written off 30 years after the first 6 April following the end of your course. Death and permanent disability also trigger immediate cancellation. The 30-year clock starts the first 6 April after you finish or leave your course, not on graduation day — so a July 2014 graduate's write-off date is 5 April 2045. For most borrowers who started university aged 18-21, write-off falls between age 48 and 53. The Institute for Fiscal Studies estimates that around 80% of Plan 2 borrowers reach write-off without fully repaying. Check your exact date with our loan write-off checker.

Worked example: £30,000 graduate on Plan 2

A Plan 2 borrower earning a flat £30,000 gross salary for 2026-27:

• Income above threshold: £30,000 − £29,385 = £615
• Annual repayment: 9% × £615 = £55
• Monthly repayment (PAYE): £4.61

At £30,000 the borrower repays just £55 a year — well below the annual interest charge on a typical £45,000 Plan 2 balance. The loan balance is therefore growing each year despite repayments being made. This is the core reason many Plan 2 borrowers in the lower-middle income band will never fully repay before the 30-year write-off. From April 2027 the threshold is frozen at £29,385 until April 2030, so from that point this borrower's deduction rises in real terms every year that wages grow.

Worked example: £50,000 graduate on Plan 2

A higher-earning Plan 2 borrower on £50,000:

• Income above threshold: £50,000 − £29,385 = £20,615
• Annual repayment: 9% × £20,615 = £1,855
• Monthly repayment (PAYE): £154.61

At £50,000 the borrower repays £1,855 per year. Even at this level, the sliding-scale interest rate (capped at 6% from 1 September 2026) typically grows the balance faster than repayments shrink it for the first 5-10 years post-graduation. Only borrowers who sustain incomes above roughly £55,000 to £60,000 for most of their career fully repay before the 30-year cutoff. Use our overpayment calculator to test whether voluntary overpayment makes sense for your career trajectory, or our total loan cost calculator to model lifetime cost.

Plan 2 vs other Plans

Compared to Plan 1 (pre-2012 English/Welsh + NI), Plan 2 has a higher threshold (£29,385 vs £26,900 in 2026-27) but a much higher interest cap (RPI to RPI+3%, against the lower of BoE+1% or RPI on Plan 1) and a longer write-off: Plan 2 runs 30 years against Plan 1's 25. Against Plan 5 (England only, courses starting on or after 1 August 2023), Plan 2 has a higher threshold (£29,385 vs £25,000) and a shorter write-off, 30 years against the 40 years Plan 5 borrowers face, but a higher interest formula, so the same borrower starting in 2022 vs 2024 has very different long-run economics. Against Plan 4 (Scottish SAAS, £33,795 threshold, interest set at the lower of RPI or Bank of England base rate + 1%), Plan 2 is materially more expensive at any income above £30,000. Plan 2 + Postgraduate Loan stacks both deductions for a combined 15% marginal rate. See the Plan 2 vs Plan 5 comparison or the full thresholds guide for every plan side-by-side.

FAQs

What is the Plan 2 threshold for 2026-27?

The Plan 2 repayment threshold for 2026-27 is £29,385 per year, £2,448 monthly and £565 weekly. You repay 9% of gross income above this level. The threshold was frozen at £27,295 between 2021-22 and 2024-25, rose to £28,470 in April 2025 and to £29,385 in April 2026. It is then frozen at £29,385 from April 2027 to April 2030.

Who is on Plan 2?

Plan 2 covers English undergraduates who started between 1 September 2012 and 31 July 2023, and Welsh undergraduates who started from 1 September 2012 onwards. It is the largest UK plan by borrower count. If you started in England from 1 August 2023 you are on Plan 5; Wales stayed on Plan 2. Pre-September-2012 starters and all Northern Irish borrowers are on Plan 1.

What is the Plan 2 interest rate in 2026?

Plan 2 uses a sliding scale: RPI only at £29,385 or below, RPI plus up to 3% across the earnings band up to £52,884, and the full RPI + 3% at £52,885 or above. While studying, interest is always RPI + 3% regardless of income. Plan 2 and Postgraduate Loan interest is also capped at 6% from 1 September 2026 for the 2026/27 academic year, so the headline Plan 2 rate is 6% (cap in force since 1 September 2026; would otherwise be 7.1%).

When is a Plan 2 loan written off?

Plan 2 balances are written off 30 years after the April following the end of your course. Death and permanent disability also trigger immediate cancellation. For a typical 2018 graduate this means a write-off date in April 2049, around age 52.

Is the Plan 2 threshold frozen?

Not at the moment. The Department for Education froze the Plan 2 threshold at £27,295 from the 2021-22 tax year to the 2024-25 tax year, then uprated it to £28,470 in April 2025 and to £29,385 in April 2026. A new freeze announced at the Autumn Budget 2025 holds the threshold at £29,385 from April 2027 to April 2030, which quietly lowers the real-terms threshold every year that freeze runs.

Can I pay off my Plan 2 loan early?

Yes. Voluntary overpayments are accepted at any time with no penalty. However, only the top ~17% of Plan 2 earners are projected to fully repay before the 30-year cutoff, so overpayment rarely saves money for middle-income borrowers. High earners with sustained salaries of £60,000 or more are the main exception.

Does Plan 2 affect my credit score?

No. Plan 2 loans do not appear on UK credit files. However, mortgage and personal-loan affordability is reduced because lenders count the monthly deduction as a fixed outgoing, typically capping borrowing capacity by roughly 4x the annual repayment amount.

How does Plan 2 stack with Postgraduate Loan?

Plan 2 and Postgraduate Loan repayments are paid simultaneously, not consecutively. You pay 9% above £29,385 on Plan 2 plus 6% above £21,000 on PGL. A borrower on £40,000 with both loans pays £79.61 plus £95.00 = £174.61 monthly. Combined marginal rate reaches 15% across the relevant income bands.

What is a plan type 2 student loan?

Plan type 2 is the wording the HMRC starter checklist uses when a new employer asks which student loan you have. It means a Plan 2 loan: 9% of pay above £29,385 a year (£2,448 a month) in 2026-27. If you tick the wrong plan type your employer deducts against the wrong threshold, so check your SLC account before you answer.

Is Plan 2 student finance the same as a Plan 2 student loan?

Yes. Student Finance England and Student Finance Wales paid the money out, the Student Loans Company holds the balance, and HMRC collects the repayments through PAYE or Self Assessment. All three are describing the same Plan 2 loan, so the threshold, the 9% rate, the interest formula and the 30-year write-off on this page apply whichever name is on your paperwork.

Plan 2 optimization strategies

Because most Plan 2 borrowers will never fully repay, the optimization question flips compared to Plan 1. For typical earners (£25,000 to £50,000 career ceiling), Plan 2 behaves like a graduate tax: the 9% deduction continues for 30 years and the balance is written off. Voluntary overpayment in this scenario is wasted money. Instead, focus on salary sacrifice into pension — it reduces the income used for the 9% calculation, lowering your monthly deduction while also boosting retirement savings. For high earners who will fully repay (sustained £60,000 or more), the calculation flips: each pound of overpayment saves several pounds of future RPI+3% interest. Read our full Plan 2 strategy guide for an income-based decision tree.