Last updated: July 2026
Plan 5 is the student loan repayment plan for English undergraduates and postgraduates who started their course on or after 1 August 2023. Repayments began in April 2026, with a threshold of £25,000 a year, the lowest of any current student loan plan.
This guide is here to help you get up to speed, whether you’re on a Plan 5 loan yourself or you’re a payroll professional using payroll software who needs to know how the calculations work. There’s plenty to cover, so let’s get started.
What is Plan 5?
Student Finance England introduced Plan 5 for new university students who started their course on or after 1 August 2023. It only applies to students in England studying at a “recognised” institution on a “recognised” course. First degrees, Higher National Diplomas, and teacher training all qualify, and some part-time courses are eligible too.
Students in Wales and Scotland are subject to different rules, so we won’t cover those here. And if you were already partway through a course before August 2023 (or you’d already graduated), Plan 5 doesn’t apply to you. You’ll stay on whichever plan you started under.
Why the reform?
According to the Government, the changes to student finance were designed to lessen the load of student loans on taxpayers. They also maintained that graduates wouldn’t pay back more than they’d borrowed in real terms, thanks to the removal of the old 3% interest premium.
This works well for graduates who never earn much above the threshold, since they’re protected from real-terms interest growth. But be aware that a lower repayment threshold also means many more graduates end up repaying something, and repaying it for longer, than under previous plans.
When do students have to start paying back their Plan 5 Student Loan?
It’s bad luck for the bright-eyed and bushy-tailed new starters from September this year because their repayment threshold will be lower. Which means they’ll have to start paying back what they owe after they earn more than £25,000, and they’ll pay off 9% of earnings over £25,000. So, if you earn £30,000, you’ll pay that 9% on £5,000 per year. Lucky old Plan 2 students have to be earning over £27,295 a year before putting their hands in their pockets.
And repayment doesn’t go on how much you owe, you’ll pay based on how much you earn.
The repayment threshold is frozen until April 2027
The newly graduated won’t have to start paying off their loans until the April after they graduate (as long as they’re earning more than the repayment threshold). So, for Tom who’s reading Sports Science at Keele from September 2023 – he won’t have to start paying back what he’s borrowed until April 2027. For Sarah at Nottingham, who realised she didn’t really have a passion for archaeology after all so dropped out, she’s still got until 2026 until she has to make repayments. It’s the same for students on a shorter course of one or two years.
If the student who has finished their course earns less than £25,000, they don’t have to make repayments at all.
After April 2027, the repayment threshold will go up in line with inflation. That’ll make things slightly easier as with every threshold increase, more of your earnings will be untouched before the repayments are applied.
What are the benefits of Plan 5 compared with Plan 2?
With Plan 2, students repay their loan in line with the Retail Price Index (RPI), plus an extra 3% interest on top. Plan 5 removes that extra 3%, so Plan 5 borrowers pay in line with RPI only. In real terms, that means they never pay back more than they originally borrowed. The amount owed still rises with inflation, but not because of additional interest charges.
That’s a genuine improvement on the old system, where RPI plus 3% could add up substantially over a 30-year term.
40 years to repay
With Plan 5, the repayment period has been stretched to a lengthy 40 years, rather than the 30 years that Plan 2ers currently have. This makes it more likely that students will actually pay off their loans in their lifetime and could still be making payments into grandparenthood! After 40 years, anything owing will be written off.
What’s the deal with living loans?
Living (or maintenance) loans cover the living expenses associated with student life, such as food, transport, accommodation. According to Save The Student’s National Student Money Survey, the maintenance loan is one of the main sources of income for uni goers. Students can apply for a maintenance loan but how much they get will depend on how much their parents earn (or their household income in general, if they’re not living with parents) and the place where they’ll live and study.
The bad news? The maintenance loan amount hasn’t risen with inflation. This means that the amount any student will get will fall short of their actual living costs during the uni year. Inflation is at more than 10% at the moment and with the living loan only increasing by 2.8%, it’s easy to see how students will be left a whopping £1500 worse off for the year, than if it had increased with inflation.
Below is a table showing the maximum Maintenance Loan for the 2026/27 academic year, using Student Finance England’s official figures, by household income.
| Househole income | Living with parents / at home | Living away (outside London) | Living away (in London) |
|---|---|---|---|
| £25,000 | £9,118 | £10,830 | £14,135 |
| £30,000 | £8,354 | £10,058 | £13,349 |
| £35,000 | £7,589 | £9,285 | £12,563 |
| £40,000 | £6,825 | £8,512 | £11,777 |
| £45,000 | £6,060 | £7,739 | £10,991 |
As with previous years, maintenance loan increases haven’t always kept pace with the cost of living, so it’s worth budgeting carefully rather than assuming the loan will cover everything.
As with tuition fee loans, Plan 5 repayments started in the 2026/27 tax year, and only apply once someone’s earning over the £25,000 threshold.
So, what does all this really mean?
The reforms mean new English students since 2023 are generally repaying more of their loans than the generations before them. The 40-year repayment period, the lower threshold, and a smaller government contribution all point the same way: more graduates paying back more of what they borrowed, over a longer stretch of time.
At the same time, the lower threshold means graduates start repaying earlier in their careers, since they cross £25,000 sooner than they would the higher Plan 2 threshold. IFS analysis published around Plan 5’s introduction estimated that roughly 52% of new students were likely to repay their loans in full, compared with about 23% of Plan 2 students. Of course, actual outcomes depend heavily on what graduates go on to earn.
To give you an idea of figures, here’s how monthly repayments compare across the current plans:
| Annual income (before tax) | Monthly income (before tax) | Plan 1 repayment | Plan 2 repayment | Plan 4 repayment | Plan 5 repayment |
|---|---|---|---|---|---|
| £25,000 | £2,083 | £0 | £0 | £0 | £0 |
| £28,000 | £2,333 | £8 | £0 | £0 | £22 |
| £31,000 | £2,583 | £31 | £12 | £0 | £45 |
| £33,000 | £2,750 | £46 | £27 | £0 | £60 |
| £40,000 | £3,333 | £98 | £80 | £47 | £113 |
As the table shows, Plan 5 borrowers pay more each month than borrowers on any other current plan at the same income, thanks to the lower £25,000 threshold.
Will Plan 5 students have to pay back more than they borrowed?
Not in real terms. Even though Plan 5 borrowers may be repaying for longer, the loan’s value won’t increase beyond RPI, since Plan 5 doesn’t carry the extra 3% interest that older plans did. Think of it like buying the same basket of goods now and years down the line: the pound amount changes with inflation, but the real value doesn’t.
That said, inflation itself isn’t always predictable, so what feels manageable now may feel different a few years on, particularly if a graduate’s income grows more slowly than expected. If someone never earns above £25,000, the interest rate won’t matter at all, because the loan gets written off after 40 years regardless.
Need a hand to manage student loan deductions?
If this sounds confusing for students (and expensive for their parents!) we know this is going to be challenging for Payroll professionals. Keeping track of the plans, repayments, thresholds and all that compliance is going to be near impossible without a good system in place.
But there’s no need to get lost in a sea of changes. Cintra makes managing student loan deductions an absolute breeze, because all those fiddly calculations (and all that compliance) are taken care of. With Cintra, you can apply student loan plans to your different employees (no matter which Plan they were on) and automate the calculations and deductions… so there’s absolutely nothing for you to stress over. Except saving for your kids’ degree years!
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Q. What is Plan 5?
A. Plan 5 is the student loan repayment plan for English undergraduates and postgraduates who started their course on or after 1 August 2023.
Q. When did Plan 5 repayments start?
A. Repayments started in April 2026, as part of the 2026/27 tax year.
Q. What's the Plan 5 repayment threshold?
A. £25,000 a year. Borrowers repay 9% of everything they earn above that, until April 2027, after which the threshold rises in line with the Retail Price Index (RPI).
Q. How is Plan 5 different from Plan 2?
A. Plan 5 has a lower repayment threshold (£25,000 versus £29,385 for 2026/27), no extra 3% interest on top of RPI, and a longer 40-year repayment term compared with Plan 2's 30 years.
Payroll Legislation Guide
The facts, figures, thresholds and allowances for 2026/27 spanning tax, National Insurance, pensions, statutory payments and more.
