Plan 5 vs Plan 2: what the 40-year term means for a 2026 starter
If you started a course in September 2026, you are on Plan 5. If you started between September 2012 and July 2023, you are on Plan 2. They are not small variations on each other and the difference is not the headline debt figure, which barely matters. It is the threshold, the term and the interest rate, in that order.
Five items, then the numbers.
1. Which plan you are on is decided by one date, and it is not your enrolment date
6 April 2026. The government’s guide to student loan terms and conditions for 2026 to 2027 was last updated on this date and sets out the split: Plan 2 covers courses started between 1 September 2012 and 31 July 2023, and Plan 5 covers courses started on or after 1 August 2023. It is the start of your course that decides it, not the year you graduate or the year you start repaying. Students who took a placement year, deferred, or transferred course sometimes guess wrong on this and it changes every figure below.
Why it matters: everything else in this piece depends on getting this one date right, and you can check it in your online repayment account, or against the plan descriptions on gov.uk’s student finance pages, rather than guessing.
2. The threshold is £4,385 lower, and that gap is the real change
Current thresholds. Plan 5 repayments start at £25,000 a year, which is £2,083 a month or £480 a week. Plan 2 starts at £29,385, which is £2,448 a month or £565 a week. Both take 9% of what you earn above the line, and nothing at all below it.
Why it matters: a Plan 5 graduate starts repaying £4,385 of salary earlier than a Plan 2 graduate, and once you are above both lines the extra costs exactly 9% of £4,385, which is £394.65 a year or £32.89 a month, at every salary.
3. What that looks like on a real starting salary
| Annual salary | Plan 2 a year | Plan 5 a year | Plan 5 a month | Difference a month |
|---|---|---|---|---|
| £25,000 | £0 | £0 | £0 | £0 |
| £27,500 | £0 | £225.00 | £18.75 | £18.75 |
| £30,000 | £55.35 | £450.00 | £37.50 | £32.89 |
| £35,000 | £505.35 | £900.00 | £75.00 | £32.89 |
| £40,000 | £955.35 | £1,350.00 | £112.50 | £32.89 |
The row worth staring at is £30,000. A Plan 2 graduate on that salary pays £4.61 a month. A Plan 5 graduate on the identical salary pays £37.50, because they are £5,000 over their threshold rather than £615 over theirs.
Why it matters: the gap is widest in proportional terms exactly where most graduates start, in the mid to high twenties, and it narrows as a share of salary the more you earn.
4. Forty years, not thirty
The write-off rule. Gov.uk states that Plan 2 loans are written off 30 years after the April you were first due to repay, and Plan 5 loans 40 years. For someone who graduates at 21 and starts repaying the following April, that is cancellation at around 52 on Plan 2 and around 62 on Plan 5.
Why it matters: the extra decade lands in your fifties and sixties, the years of highest earnings for most people, which is when the 9% is largest in cash terms. That is the mechanism, and it is why the 40-year term is a bigger change than it sounds.
5. Plan 5 interest is lower, and that is the part in Plan 5’s favour
1 September 2026 to 31 August 2027. RPI for this period is 4.1%. Plan 5 interest is normally set at RPI only, so 4.1%. Plan 2 runs on a sliding scale by income, from RPI at the bottom to RPI plus 3% above £52,885, with the whole thing capped at 6% for the year.
Why it matters: a higher-earning Plan 2 borrower can be charged up to 6% while a Plan 5 borrower on the same salary is charged 4.1%, so Plan 5 is not worse on every measure. It is worse on the two that decide what most graduates actually pay.
The bit nobody tells you about the balance
The number on your statement is not a debt in the ordinary sense and treating it like one leads people to make expensive decisions.
You repay 9% of income above a threshold for a fixed number of years, and then whatever is left is cancelled. If you never cross the threshold, you never pay anything, whatever the balance says. If the balance grows with interest faster than you repay, and for a large share of borrowers it does, the balance is simply the thing that gets written off at the end.
The practical consequence: voluntary overpayments only help if you were going to clear the loan before the write-off date anyway. On Plan 5, with a 40-year term, far more people will clear it than on Plan 2, so the calculation is genuinely different and genuinely harder. It depends on your whole career earnings, which you do not know at 22.
The counterweight
Two things in the other direction, honestly stated.
The lower threshold means the repayment is smaller as a proportion of a low salary than a flat charge would be, and it still falls to zero the moment your income does. That is the design, and it does what it was designed to do.
And 4.1% on Plan 5 against a cap of 6% on Plan 2 is not nothing over forty years. A Plan 5 borrower who does clear the loan clears it having been charged less interest per year than a high-earning Plan 2 borrower would have been.
Frequently asked questions
I started in 2023. Which plan am I on? It depends on the month. A course starting on or after 1 August 2023 is Plan 5. One that started on or before 31 July 2023 is Plan 2. Check your online repayment account rather than working it out from memory.
Does the balance being bigger mean I pay more? Not directly. Your monthly repayment is set by your salary and your threshold, not by the balance. The balance decides only whether you clear the loan before it is written off.
What happens if I go abroad? You still have to repay, and you must tell the Student Loans Company. Overseas thresholds are set by country and differ from the UK figure.
Should I pay it off early? Only if you are confident you would otherwise clear it before the write-off date. With a 40-year term on Plan 5 that is a real possibility for higher earners, and close to irrelevant for many others.
Updated on 11 September 2026.
Sources
- Gov.uk, student loans: a guide to terms and conditions 2026 to 2027, updated 6 April 2026
- Gov.uk, repaying your student loan: how much you repay
- Gov.uk, when your student loan gets written off or cancelled
- Gov.uk, student finance
The Stripes Blog reports the rules and the figures. It does not give personal financial advice.…