Guide
Student loan repayment and your marginal rate
It is not a tax, but it comes out of the same pay on the same day at 9% of everything above a threshold. For any decision about a rise, it is part of the rate.
| Plan | Threshold | Rate | Who is on it |
|---|---|---|---|
| Plan 1 | £26,900 | 9% | Started an undergraduate course in England or Wales before September 2012, or in Northern Ireland. |
| Plan 2 | £29,385 | 9% | Started an undergraduate course in England or Wales between September 2012 and July 2023. |
| Plan 4 | £33,795 | 9% | Studied in Scotland. |
| Plan 5 | £25,000 | 9% | Started an undergraduate course in England from August 2023. |
| Postgraduate Loan | £21,000 | 6% | A master's or doctoral loan. Deducted at 6%, and stacks on top of any undergraduate plan. |
A postgraduate loan is deducted alongside an undergraduate plan, not instead of it — so someone with both pays 15% of income above the higher threshold.
What it costs
| Salary | Plan 1 | Plan 2 | Plan 4 | Plan 5 | Plan 2 + postgrad |
|---|---|---|---|---|---|
| £25,000 | £0 | £0 | £0 | £0 | £240 |
| £30,000 | £279 | £55.35 | £0 | £450 | £595.35 |
| £40,000 | £1,179 | £955.35 | £558.45 | £1,350 | £2,095.35 |
| £50,000 | £2,079 | £1,855.35 | £1,458.45 | £2,250 | £3,595.35 |
| £60,000 | £2,979 | £2,755.35 | £2,358.45 | £3,150 | £5,095.35 |
| £80,000 | £4,779 | £4,555.35 | £4,158.45 | £4,950 | £8,095.35 |
| £100,000 | £6,579 | £6,355.35 | £5,958.45 | £6,750 | £11,095.35 |
What it does to the rate on your next £100
This is the part that matters for decisions and the part no tax table shows. Repayment is 9% of gross above the threshold, so it adds 9 points to your marginal rate for as long as the loan exists.
| Salary | No loan | Plan 2 | Plan 2 + postgrad |
|---|---|---|---|
| £30,000 | 28% | 37% | 43% |
| £45,000 | 28% | 37% | 43% |
| £55,000 | 42% | 51% | 57% |
| £80,000 | 42% | 51% | 57% |
| £100,000 | 62% | 71% | 77% |
| £110,000 | 62% | 71% | 77% |
| £125,140 | 47% | 56% | 62% |
A graduate with both loans in the allowance taper faces 77% on further pay. In Scotland the same case is higher still.
Should you pay it off early?
This site will not answer that, because the answer depends on the interest rate on your plan, your expected earnings for the next thirty years, and when your balance is written off — and getting any of those wrong changes the sign of the answer. What it can tell you is the cash-flow arithmetic: repayment is a fixed percentage of income above a threshold regardless of the balance, so for most plans overpaying does not reduce your monthly deduction at all. It shortens the period, if you would have cleared the balance before write-off, and does nothing whatsoever if you would not have.
That last point is the one people miss: for a large balance on a long plan, voluntary overpayment can be money given away for no reduction in what you pay each month and no earlier release.
Why it behaves like a tax even though it is not one
A student loan repayment is not a tax: it is repayment of a debt, it stops when the debt is cleared or written off, and it does not fund general spending. But for the purpose of any decision about pay, the distinction does not matter. It is deducted at source by your employer, it is a fixed percentage of everything above a threshold, and it leaves your pay packet on the same day as income tax and National Insurance. Any figure used to price a rise, a bonus or a pension contribution has to include it, which is why every calculation on this site offers it.
The practical effect is to add nine percentage points to the marginal rate for most plans, or six for a postgraduate loan, on every pound above the threshold. Someone with both an undergraduate and a postgraduate loan is paying both, which is fifteen points on top of tax and National Insurance.
Which plan you are on is not a choice
It is determined by where and when you studied, not by anything you can elect. Broadly: Plan 1 for English and Welsh undergraduate courses started before September 2012, and for Northern Ireland; Plan 2 between September 2012 and July 2023; Plan 5 from August 2023; Plan 4 if you studied in Scotland. A postgraduate loan is separate and repaid alongside whichever of those applies. Your payslip names the plan your employer is deducting, and that is the fastest way to check.
The write-off is the part most people ignore
Every plan has a write-off date, and for a large number of borrowers the loan is never repaid in full before it arrives. Where that is true, the repayment is functionally a fixed-rate graduate tax for a defined period, and voluntary overpayment simply hands money to the Student Loans Company that would otherwise have been written off. Where it is not true — a high earner who will clear the balance comfortably — overpayment saves real interest.
Which case you are in depends on your plan, your balance, your interest rate and your expected earnings over decades, and it is genuinely difficult to know. That is a reason to be sceptical of confident general advice in either direction, including advice to always overpay. The one thing that is certain is the marginal rate you are paying now, which is what the table above computes.
Checking this against your own payslip
Everything above is arithmetic on published parameters, which means it can be checked rather than trusted — and the check is worth doing, because the most common reason a figure here differs from your payslip is not an error on either side. Four things account for nearly all of it.
A tax code that is not the standard one changes your allowance, and codes carrying an adjustment from an earlier year are common. A benefit in kind — a company car, private medical cover — is taxed through the code and does not appear as pay. A workplace pension deducted before tax reduces taxable pay, so your gross and your taxable figure are not the same number. And National Insurance is charged per pay period rather than annually, which is why a month containing a bonus takes proportionally more than the annual figures here imply, and why the year-end total still reconciles.
If none of those explains the gap, it may be an error on this side, and that is worth an email to corrections@taxwedge.com. Corrections are published with a date at /changes/ whether or not anyone else would have noticed.
Questions people actually ask
How much student loan will I repay on £40,000?
£955.35 a year on Plan 2 — 9% of the £10,615 above the £29,385 threshold. On Plan 1 it is £1,179, and on Plan 5 £1,350.
Do student loan repayments count as tax?
No. They are repayment of a debt, they stop when the balance is cleared or written off, and they are not revenue in the way tax is. But they are deducted from the same pay by the same payroll at a fixed percentage of income, so for working out what a rise is worth they behave exactly like a 9% tax and should be counted as one.
Do I repay two loans at once?
Yes, if you have an undergraduate plan and a postgraduate loan. They are separate deductions with separate thresholds — 9% above the undergraduate threshold and 6% above £21,000 — and they are taken together.