Step-by-step calculation
Step 1 — Confirm you're on Plan 1
Plan 1 applies if you started university: - Before September 2012 in England or Wales - Before September 2017 in Scotland - Any time in Northern Ireland (since 1998)
Your Student Loans Company account at online.slc.co.uk shows which plan(s) you have.
Step 2 — Identify your threshold-relevant income
For PAYE-employed Plan 1 borrowers: - Start with your gross annual salary - Subtract any salary-sacrifice pension contribution - Subtract any net-pay-arrangement pension contribution - (Do NOT subtract relief-at-source pension — that comes from net pay)
Result: your threshold-relevant income for Plan 1.
Step 3 — Apply the formula
Annual deduction = max(0, threshold-relevant income − £26,900) × 9%
If income ≤ £26,900: £0 If income > £26,900: (income − £26,900) × 0.09
Step 4 — Convert to per-period
PAYE doesn't actually use the annual calculation. It uses per-pay-period:
- Monthly threshold: £26,900 / 12 = £2,241.67
- Weekly threshold: £26,900 / 52 = £517.31
- 4-weekly: £26,900 / 13 = £2,069.23
Each pay period: earnings above the period threshold × 9%, rounded DOWN to the nearest pound.
Worked example 1 — Plan 1 on £30,000
Annual: - Threshold-relevant income: £30,000 - Above £26,900: £3,100 - 9% × £3,100 = £279/year
Monthly: - Gross: £2,500 - Period threshold: £2,241.67 - Above threshold: £258.33 - 9% × £258.33 = £23.25 → rounds DOWN to £23/month - Annualised: £23 × 12 = £276 (small rounding from annual view)
Worked example 2 — Plan 1 on £45,000
Annual: - Above £26,900: £18,100 - 9% × £18,100 = £1,629/year
Monthly: - Gross: £3,750 - Period threshold: £2,241.67 - Above: £1,508.33 - 9% × £1,508.33 = £135 → £135/month
This earner pays about £1,629/year on top of Income Tax + NI. Combined with the £45,000 earner's roughly £6,000 Income Tax and £2,600 NI, total deductions approach 23%.
Worked example 3 — Plan 1 on £75,000
Annual: - Above £26,900: £48,100 - 9% × £48,100 = £4,329/year
Monthly: £360. Combined with Income Tax + NI on £75,000, total deductions are about 27%.
Worked example 4 — Plan 1 with salary sacrifice
£28,000 base salary, 5% salary sacrifice into pension (£1,400/year sacrificed):
Without sacrifice: - Above £26,900: £1,100 - 9% × £1,100 = £99/year student loan
With sacrifice: - Threshold-relevant income: £28,000 − £1,400 = £26,600 - Below £26,900: £0 student loan
The £1,400 sacrifice eliminates the £99 deduction AND saves Income Tax + NI on the sacrificed amount. Total saving: ~£99 (SL) + ~£392 (basic-rate tax + NI on £1,400) = £491. The £1,400 goes to pension.
For Plan 1 borrowers between £26,900 and £30,000, this is the highest-leverage planning move available.
Plan 1 + Postgraduate Loan combination
If you have Plan 1 plus a Postgraduate Loan, both deduct from the same pay:
| Salary | Plan 1 (9% above £26,900) | PGL (6% above £21,000) | Combined |
|---|---|---|---|
| £25,000 | £0 | £240 | £240 |
| £30,000 | £279 | £540 | £819 |
| £40,000 | £1,179 | £1,140 | £2,319 |
| £60,000 | £2,979 | £2,340 | £5,319 |
Combined rate above both thresholds: 15% (9% + 6%) of every additional pound.
Bonus / variable pay impact
PAYE calculates per pay period, not annually. A bonus month significantly above the per-period threshold attracts a much higher deduction in that month:
Example: £30,000 base + £6,000 bonus paid in October.
Normal month: £23 deduction (per above) October pay: £2,500 + £6,000 = £8,500 gross - Above £2,241.67 threshold: £6,258 - 9% × £6,258 = £563
October's £563 vs normal £23 = £540 spike. The November pay run returns to normal.
There's no end-of-year reconciliation for the PAYE deduction — what's deducted is what's owed. (Self Assessment would handle multi-source reconciliation.)
Plan 1 interest
Interest accrues daily on your outstanding balance: - Base rate: Bank of England base rate + 1% - Capped at RPI (inflation)
For most Plan 1 borrowers, interest is modest relative to repayments — the balance often shrinks in real terms during steady employment. Interest doesn't affect your monthly deduction; only the balance.
When Plan 1 writes off
Two write-off rules: - Pre-2006 Plan 1 starters: the earlier of age 65 or 25 years from first becoming repayable - 2006+ Plan 1 starters: 25 years from first becoming repayable
"First becoming repayable" is the April after you finish your course. After write-off, the remaining balance is forgiven without penalty.
Should you pay extra?
For most Plan 1 borrowers, voluntary lump-sum overpayment doesn't generate value: - Interest is modest (often below salary inflation) - 25-year write-off means many borrowers won't fully repay - Money invested elsewhere usually returns more
Exceptions: borrowers very close to write-off date with small balance; borrowers moving abroad who want to clear UK debt.
Practical checklist
- Confirm Plan 1 in your SLC account
- Calculate threshold-relevant income (gross − salary-sacrifice pension)
- Apply formula: max(0, income − £26,900) × 9%
- Verify monthly deduction on payslip matches expected
- Consider pension sacrifice if you're within ~£3,000 of the threshold
- Use the student loan calculator to verify any scenario
In short
Plan 1 student loan repayment for 2026/27: 9% above £26,900, per pay period. Calculation is mechanical. Salary sacrifice is the highest-leverage optimisation for borrowers near threshold. 25-year write-off. Use the student loan calculator for instant scenarios. For deeper coverage see Plan 1 thresholds and write-off →.