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How Student Loan Repays Can Be Calculated from Your Salary

-7 min read

Learn how to calculate student loan repayments based on your salary in the UK, with examples and straightforward instructions to help you take immediate action.

How Student Loan Repays Can Be Calculated from Your Salary

Introduction

Student loan repayments are calculated according to salary, but how exactly is this done? You are not alone-thousands across the UK are trying to figure how much will be deducted every month from their pockets. This serves to be information that you can use to budget and further plan your financial life. This piece clearly explains how student loan repayment works, gives you the thresholds to know for the 2025/26 tax year, and offers some really good examples of calculating repayments the right way. After this, you will be ready to confidently take charge of your student loan repayments.

Overview of UK Student Loan Repayment Plans

In the UK, there are several payment plans for student loans, so the repayment rules are different depending on which plan you are under. The common types are as follows:

Plan 1

  • Mainly for students from England and Wales starting university before 1 September 2012.
  • Repayments begin when your salary exceeds £26,065 a year (2025/26).

Plan 2

  • For students committing to their studies in England and Wales between 1 September 2012 and 31 July 2023.
  • Repayments begin when salary exceeds £28,470 per annum (2025/26).

Plan 4

  • For students from Scotland commencing courses after 1 September 1998.
  • Repayment threshold is at present £26,065 per year (2025/26).

Postgraduate Loan

  • For postgraduate Master or Doctoral courses.
  • Repayment threshold is £21,000 per year (2025/26).

Plan 5

  • For students starting undergraduate or postgraduate courses after 1 August 2023 in England and Wales.
  • Repayments will commence from April 2026 at the earliest.
  • The repayment threshold will be set at £25,000 per year (2026/27) but no repayments will be due in 2025/26.

You can find out which loan type you are on by approaching the Student Loans Company (SLC).

How to Figure Out Your Student Loan Repayments

Student loan repayment depends upon your earnings and the repayment threshold that corresponds with your loan plan. This is the easy step-by-step student loan repayment formula used:

  1. Repayment threshold is subtracted from your gross annual salary.
  2. Calculate the repayment percentage:
    • Plan 1, 2, 4, or 5: You repay 9% of anything you earn above the threshold.
    • Postgraduate loan: You repay 6% of anything earned above the threshold.
  3. Divide the annual repayment by twelve.

For Example

In 2025/26, a person earning £30,000 with a Plan 2 loan will:

  1. Calculate the income exceeding the threshold: £30,000 (salary) – £28,470 (threshold) = £1,530.
  2. Calculate 9% of pounds exceeding the threshold: 9% of £1,530 = £137.70 per annum.
  3. Calculate monthly payments: £137.70 ÷ 12 = £11.48 per month.

Frequently Asked Questions on Student Loan Repayments

Do overtime or bonuses affect repayments?

Yes. Repayments are calculated on total earnings, including bonuses, overtime, and commissions. Your employer will automatically make the calculations via PAYE.

What happens if my salary changes?

If your salary changes, your repayments will be adjusted automatically. Should your income drop below the threshold, you will pay less; should it rise above, you will pay more.

Can I pay off my student loan early?

Yes, you are able to repay your student loan early with no penalty. But think twice about repaying it early, as most student loan debts carry a lower interest rate than other debt.

For more information, see: early repayments on GOV.UK.

How Interest Rates Are Applied to Student Loans

The interest that accrues varies depending on the loan type and rating band of income:

  • Plan 1: Interest accrued is at lower rate between RPI or Bank of England base rate + 1% (subject to government policy).
  • Plan 2: Interest accured depends on your income between RPI and RPI + 3%.
  • Plan 4: Interest accured depends upon RPI or RPI + 1% (check SLC for latest).
  • Plan 5: Interest accured depends upon RPI.
  • Postgraduate: Interest accured is RPI + 3%.

You should keep track of your SLC statements at least annually to monitor interest accrual.

The Effect of Your Student Loan Repayments on Your Mortgage Application

Student loans do indeed have an effect on mortgage affordability checks in that repayment reduces disposible income. However, affordability is considered more by lenders than how much you have left to pay back. Here's how to best handle it:

  • Keep up good financial behaviour by settling your debts on time with a good credit history.
  • Start looking at affordability with the mortgage calculator factoring in repayments.

Helpful tools and resources

Conclusion

Understanding student loan repayments based on your salary would behold the key to better financial planning. Having a fixed figure as to how much you are going to repay every month on student loans will make it easier for you to budget in other commitments in life, such as wedding loans or saving for that first flat, or even retirement. Freedom from finance needs continuous learning and proactive handling of your finances.