Plan 4 Student Loans Explained
Everything you need to know about Plan 4 student loans for Scottish students, including repayment thresholds and interest rates.
Plan 4 Key Details
Repayment Threshold
£27,660 per year
Interest Rate
RPI or 1.5%
Written Off After
30 years
Who Has This Plan
Scottish students
In this article
What is Plan 4?
Plan 4 student loans are specifically for students who normally live in Scotland and study at Scottish universities. This plan was introduced alongside the other UK student loan plans but has distinct features tailored to the Scottish education system.
Who Has Plan 4 Loans?
You'll have a Plan 4 loan if:
- You lived in Scotland when you started your course
- You took out your first student loan on or after September 1998
- You studied at a Scottish university or college
Key Features
Like other UK student loan plans, Plan 4 is income-contingent, meaning:
- You only repay when earning above the threshold
- Repayments are automatically deducted through PAYE
- The loan is written off after 30 years
- Your loan doesn't affect your credit score
Plan 4 Repayments
How Much Will You Repay?
For Plan 4 loans, you repay 9% of your income above the threshold of £27,660 per year. Here's how to calculate your repayment:
Example Calculation
For someone earning £35,000 per year:
- Annual salary: £35,000
- Minus threshold: £35,000 - £27,660 = £7,340
- Multiply by 9%: £7,340 × 0.09 = £660.60 per year
- Divide by 12: £660.60 ÷ 12 = £55.05 per month
Repayment Table
| Annual Salary | Monthly Repayment | Annual Repayment |
|---|---|---|
| £25,000 | £0 | £0 |
| £30,000 | £17.55 | £210.60 |
| £35,000 | £55.05 | £660.60 |
| £40,000 | £92.55 | £1,110.60 |
| £50,000 | £167.55 | £2,010.60 |
Interest Rates
Plan 4 loans have a relatively straightforward interest rate structure. The interest rate is set at the lower of:
- The Retail Price Index (RPI), or
- 1.5%
This means your interest rate is capped at a maximum of 1.5%, regardless of inflation. During periods of low inflation, the rate will be even lower.
Current Plan 4 Interest Rate
As of 2023/24, the Plan 4 interest rate is 1.5%. Unlike Plan 2 loans, Plan 4 interest rates do not vary based on your income.
Why Plan 4 Interest Rates Are Lower
Plan 4 typically has one of the lowest interest rates among UK student loan plans. The 1.5% cap means Scottish students benefit from lower interest charges compared to Plan 2 borrowers, who can face rates of up to RPI+3%.
Plan 4 vs Other Plans
Here's how Plan 4 compares to other UK student loan plans:
| Feature | Plan 1 | Plan 2 | Plan 4 | Plan 5 |
|---|---|---|---|---|
| Threshold | £22,015 | £27,295 | £27,660 | £25,000 |
| Interest | RPI or Base+1% | RPI to RPI+3% | RPI or 1.5% | RPI |
| Write-off | 25 years | 30 years | 30 years | 40 years |
| Location | Pre-2012 England/Wales | 2012-2023 England/Wales | Scotland | Post-2023 England/Wales |
Key Advantages of Plan 4
- Lower interest rate: The 1.5% cap is more favorable than Plan 2's RPI+3%
- Higher threshold: You start repaying at £27,660, higher than Plan 1 and Plan 5
- 30-year write-off: Shorter than Plan 5's 40 years
Frequently Asked Questions
Can I pay off my Plan 4 loan early?
Yes, you can make voluntary repayments at any time. Given Plan 4's relatively low interest rate (capped at 1.5%), paying off early may not provide significant savings for most borrowers unless you're certain you'll repay in full before the 30-year write-off.
What happens to my Plan 4 loan if I move to England?
Your loan plan doesn't change if you move within the UK. You'll continue to repay according to Plan 4 terms regardless of where you live or work in the UK. Your employer will continue to deduct repayments through PAYE using the Plan 4 threshold.
How does Plan 4 compare to tuition fees in Scotland?
Scottish students studying in Scotland typically don't pay tuition fees directly, as these are covered by the Student Awards Agency Scotland (SAAS). Plan 4 loans primarily cover living costs (maintenance). If Scottish students study elsewhere in the UK, they may pay tuition fees and borrow more.
Does my Plan 4 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 affordability for mortgages or other loans.
Calculate Your Plan 4 Repayments
Use our calculators to see how Plan 4 loans will affect your finances
Dr. Lila Sharma
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.