Plan 2 Student Loan Calculator

Complete Guide to Plan 2 Student Loans

Plan 2 is by far the most common UK student loan plan in existence today. It was introduced in September 2012, when tuition fees in England and Wales were raised from a maximum of £3,375 per year to up to £9,250 per year. Alongside the increase in tuition fees, maintenance loans were also expanded, meaning most Plan 2 borrowers graduated with total debts of £40,000 to £60,000 or more. Some graduates — particularly those who studied in London or took longer courses — may owe over £70,000 by the time interest is factored in.

Despite the eye-catching headline figures, Plan 2 is designed as an income-contingent loan, which means your repayments are based entirely on what you earn, not what you owe. If you never earn above the repayment threshold, you never repay a penny. After 30 years, any outstanding balance is written off completely and tax-free.

Who Has a Plan 2 Loan?

You are on Plan 2 if:

• English or Welsh students who started an undergraduate course on or after 1 September 2012 and before 1 August 2023
• EU students who studied in England or Wales and started between September 2012 and July 2023
• Students who took out an Advanced Learner Loan in England between 1 August 2013 and 31 July 2023

If you started your course in England from August 2023 onwards, you are on the newer Plan 5 instead. If you studied in Scotland, you are on Plan 4. Not sure? Use our which plan am I on? guide.

Key Plan 2 Facts for 2026/27

• Annual repayment threshold: £29,385 per year (£2,448.75 per month, or £565 per week)
• Repayment rate: 9% of your gross income above the threshold
• Interest rate: 3.2% to 6.2% (income-based sliding scale — see below)
• Write-off period: 30 years after the April you were first due to repay
• Collection method: PAYE (automatic) or Self Assessment if self-employed

How Plan 2 Interest Rates Work — The Sliding Scale

Plan 2 is unique among UK student loan plans in that it uses an income-based sliding scalefor interest. Rather than charging a single flat rate, the interest you pay depends on how much you earn:

• Earning at or below the threshold (£29,385): RPI only = 3.2%
• Earning between £29,385 and £52,885: RPI plus a gradually increasing margin, sliding from 0% up to 3%
• Earning £52,885 or above: Maximum rate of RPI + 3% = 6.2%

For example, if you earn £40,000, you are part-way between the threshold and the upper limit. Your interest rate would be approximately RPI + 1.4%, or around 4.6%. The exact formula calculates the margin as: 3% × (income − £29,385) ÷ (£52,885 − £29,385).

There is also an important protection called the interest rate cap. This ensures that your outstanding balance cannot exceed the amount it would have been if RPI + 3% had been charged from the very start of your loan. In practice, this means higher earners who pay off their loan quickly do not get penalised by accumulating excessive interest. For a comprehensive explanation of how this works, see our interest rates explained guide.

Interest During Your Course

An aspect of Plan 2 that catches many borrowers off guard is that the maximum interest rate (RPI + 3%) is charged from the moment your first loan payment is disbursed — even while you are still studying and have no income. This means interest accrues throughout your three or four-year degree, and by the time you graduate, your balance is already higher than the total amount you borrowed. For a typical three-year course with £9,250 tuition fees and £9,000 maintenance loans per year, a graduate might owe £58,000+ at graduation despite only borrowing around £54,750.

Repayment Examples at Different Salaries

Here is what you would repay at various salary levels on Plan 2:

Will You Repay Your Plan 2 Loan in Full?

The short answer for most graduates: probably not. Government estimates suggest that approximately 70–75% of Plan 2 borrowers will never repay their loan in full before the 30-year write-off. The high interest rate combined with large balances means that many borrowers' repayments do not even cover the interest, let alone reduce the outstanding principal.

For the majority of Plan 2 borrowers, the student loan functions more like a graduate taxthan a traditional debt. You pay 9% of income above £29,385 for 30 years, and then whatever remains is cancelled. Whether your original balance was £30,000 or £60,000 makes no practical difference to your monthly repayments — it only affects how much is left to be written off.

The borrowers who will repay in full tend to be those with consistently high earnings (typically above £50,000 from early in their career) combined with relatively modest loan balances. Use the calculator above to model your personal projection — it accounts for salary growth and interest accumulation over the full 30-year period.

Should Plan 2 Borrowers Overpay?

For the majority of Plan 2 borrowers, making voluntary overpayments is not recommended. If your loan would be written off with a remaining balance, every pound you overpay is a pound that would have been cancelled for free — effectively a donation to the government. Consider these alternatives:

• Salary sacrifice pension contributions: Reduces your gross pay and therefore reduces student loan repayments. Read our salary sacrifice guide.
• Build an emergency fund: 3–6 months of expenses in an instant-access savings account.
• Pay off high-interest debt: Credit cards (typically 20–30% APR) should always take priority over a student loan at 4–7%.
• Invest in a Stocks & Shares ISA: Historical stock market returns average 7–10% per year, potentially beating your loan's interest rate.
• Save for a house deposit: Getting on the property ladder is often a better use of spare cash than overpaying student debt that will be cancelled.

The only scenario where overpaying makes sense is if you are confident you would repay in full before write-off anyway, and overpaying would reduce the total interest you pay. Use our early repayment calculator to model exactly this.

Plan 2 Write-Off: 30 Years

Your Plan 2 loan is written off 30 years after the April following your graduation (or the April after you left your course). For a student who graduated in June 2015, the first repayment date would be April 2016, and the write-off date would be April 2046. The write-off is automatic and tax-free — you do not need to apply, and there is no tax liability on the cancelled amount.

Plan 2 and Self-Employment

Self-employed borrowers with Plan 2 loans have their repayments calculated as part of their annual Self Assessment tax return. HMRC calculates 9% of your net self-employment profit above the threshold, and this is added to your tax bill. Unlike PAYE deductions, which are spread across 12 monthly payments, Self Assessment repayments are collected as a lump sum (or two payments on account), which can create cash flow challenges. It is advisable to set aside money monthly to cover this.

Plan 2 vs Plan 5

Students starting courses from August 2023 are now on Plan 5instead of Plan 2. Plan 5 has a lower threshold (£25,000 vs £29,385), lower interest (RPI only, no sliding scale), but a much longer write-off period (40 years vs 30 years). For moderate earners, Plan 5 may actually result in higher total repayments over a lifetime, despite the lower interest rate, because you repay for up to a decade longer. Use our comparison tool to see the differences side by side.

Related calculators and guides: Should I overpay? · Salary sacrifice guide · Interest rates explained · Early repayment calculator · Plan 1 calculator · Plan 5 calculator