Step-by-step calculation
Step 1 — Confirm Plan 5
Plan 5 applies if you started higher education in England or Wales from September 2023 onwards. Earlier E&W cohorts are on Plan 2 (pre-2023) or Plan 1 (pre-2012).
Step 2 — Identify threshold-relevant income
- Gross annual salary
- Subtract salary-sacrifice pension
- Subtract net-pay pension contributions
- Don't subtract relief-at-source pension
Step 3 — Apply the formula
Annual deduction = max(0, income − £25,000) × 9%
Step 4 — Per-period
- Monthly threshold: £25,000 / 12 = £2,083.33
- Weekly threshold: £25,000 / 52 = £480.77
- 4-weekly: £25,000 / 13 = £1,923.08
Each period: earnings above period threshold × 9%, rounded DOWN.
Worked example 1 — Plan 5 on £25,000
Annual: - At exactly £25,000: £0 (no income above threshold)
Monthly: - Gross: £2,083 - Period threshold: £2,083.33 — exactly matches - Above: -£0.33 → £0 deduction
For Plan 5 borrowers at or just below the threshold, no deduction applies.
Worked example 2 — Plan 5 on £28,000
Annual: - Above £25,000: £3,000 - 9% × £3,000 = £270/year
Monthly: £22.
Notable: at £28,000, the same person on Plan 2 would pay £0 (below Plan 2's £29,385 threshold). Plan 5 starts deducting £270/year earlier than Plan 2.
Worked example 3 — Plan 5 on £40,000
Annual: - Above £25,000: £15,000 - 9% × £15,000 = £1,350/year
Monthly: £112.
Compare to Plan 2 on £40,000: - Above £29,385: £10,615 - 9% × £10,615 = £955/year - Plan 5 vs Plan 2 differential: £395 extra per year
This £400/year differential compounds substantially over 40 years (Plan 5) vs 30 years (Plan 2) of repayment.
Worked example 4 — Plan 5 + PGL on £40,000
Plan 5: 9% × £15,000 = £1,350 PGL: 6% × £19,000 = £1,140 Combined: £2,490/year
Combined monthly: £207. For Plan 5 + PGL borrowers, the combined rate above both thresholds is 15% — a substantial slice of marginal income.
Worked example 5 — Plan 5 with salary sacrifice
£26,500 base salary, 6% salary sacrifice (£1,590):
Without sacrifice: - Above £25,000: £1,500 × 9% = £135/year
With sacrifice: - Threshold-relevant income: £24,910 - Below £25,000: £0 student loan
The £1,590 sacrifice eliminates £135 SL plus saves ~£445 in Income Tax + NI. Net cost to take-home: ~£1,010 for £1,590 pension contribution.
For Plan 5 borrowers between £25,000 and £28,500, this is the most attractive single planning move.
Lifetime cost — Plan 5 vs Plan 2
Estimated total repayments over career for typical UK graduate:
| Salary trajectory | Plan 2 (30y) lifetime | Plan 5 (40y) lifetime |
|---|---|---|
| Steady £35,000 (graduate, basic-rate career) | £15,000-£22,000 | £30,000-£45,000 |
| Rising £35,000 → £60,000 over 15 years | £25,000-£40,000 | £45,000-£65,000 |
| Senior trajectory £35,000 → £90,000 | £35,000-£55,000 | £55,000-£90,000 |
Plan 5 lifetime repayments typically exceed Plan 2 by 50-80% for similar graduates. The 40-year term + lower threshold combination is the cause.
Plan 5 interest — RPI only
- Interest tracks RPI (Retail Price Index)
- No income-linked margin (unlike Plan 2's RPI + sliding margin)
In high-RPI years, Plan 5 interest meaningful; in low-RPI years modest. The interest doesn't change the 9% deduction — it affects only the balance.
When voluntary repayment makes sense (Plan 5)
For Plan 5 borrowers, voluntary repayment is more often value-positive than Plan 2 because:
- Lower interest (RPI only) means less compounding
- More borrowers project to repay in full → reducing balance reduces lifetime cost
- 40-year term means cash flow optimisation matters
Still — money invested elsewhere typically returns more than the Plan 5 interest avoided. Voluntary repayment makes sense only for borrowers with high enough income to certain about full repayment AND limited alternative investment opportunities.
When Plan 5 writes off
40 years from first becoming repayable.
First Plan 5 cohort (2023 starters): graduating 2026, first repayable April 2027, write-off April 2067.
After write-off, balance is forgiven with no credit impact, no tax event.
Plan 5 + multiple plans
You can have Plan 5 alone (most common for 2023+ E&W starters) or with PGL (if you do postgrad). Plan 5 + earlier-plan combination is impossible — Plan 5 only applies to 2023+ starters who have no prior undergrad loan.
Practical checklist
- Confirm Plan 5 in SLC account
- Calculate threshold-relevant income (gross − salary-sacrifice pension)
- Apply formula: max(0, income − £25,000) × 9%
- Verify monthly payslip deduction
- Consider pension sacrifice if within ~£3,500 of threshold
- Use student loan calculator to model long-term impact
In short
Plan 5 student loan repayment for 2026/27: 9% above £25,000 (lowest UK threshold), per pay period. Current cohort (2023+ E&W). 40-year term + lower threshold + RPI-only interest means most graduates repay in full, with lifetime cost typically 50-80% higher than Plan 2 equivalent. Pension sacrifice optimisation between £25,000-£28,500 is high-leverage. For deeper coverage see Plan 5 thresholds and write-off →.