Plan 2 mechanics (2026/27)
- Threshold: £28,470 per year
- Rate above threshold: 9%
- Calculation: per pay period through PAYE
Monthly threshold: £28,470 / 12 = £2,372.50 Weekly threshold: £28,470 / 52 = £547.50
Each pay period, PAYE deducts 9% of earnings above the period threshold. The deduction is rounded DOWN to the nearest pound.
Who has Plan 2
You're on Plan 2 if you started higher education between September 2012 and August 2023 in England or Wales. This is by far the largest cohort of active UK student loan borrowers.
After August 2023, new starters in E&W moved to Plan 5. Scottish and Northern Irish students with start dates in this window are typically on Plan 4 or Plan 1 respectively.
Worked example — Plan 2 on £30,000
Annual: - Above £28,470 = £1,530 - 9% deduction = £138/year
Monthly: - £30,000 / 12 = £2,500 gross - Period threshold: £2,372.50 - Above: £127.50 - 9% × £127.50 = £11 (rounded down)
Annualised: £132. Small differences from the annual view are rounding-related.
Worked example — Plan 2 on £45,000
Annual: - Above £28,470 = £16,530 - 9% × £16,530 = £1,488/year
Monthly: £124. Combined with Income Tax + NI, total deductions on £45,000 are roughly £980/month.
Worked example — Plan 2 on £80,000
Annual: - Above £28,470 = £51,530 - 9% × £51,530 = £4,638/year
Monthly: £386. This is approaching the level where the full repayment over 30 years could clear most of a typical Plan 2 balance — high-earning Plan 2 borrowers are the cohort most likely to repay in full.
Plan 2 + PGL
Plan 2 plus Postgraduate Loan is a common combination for postgrad-qualified workers:
| Salary | Plan 2 (9% above £28,470) | PGL (6% above £21,000) | Total annual |
|---|---|---|---|
| £30,000 | £138 | £540 | £678 |
| £40,000 | £1,038 | £1,140 | £2,178 |
| £50,000 | £1,938 | £1,740 | £3,678 |
| £75,000 | £4,188 | £3,240 | £7,428 |
Both are deducted from each pay period.
Interest on Plan 2
Plan 2 interest is the most complex of the active plans:
- Base rate: RPI (Retail Price Index)
- While studying: RPI + 3%
- After graduation:
- Income up to £28,470: just RPI
- Income £28,470 to £52,000 (or higher equivalent): RPI + sliding margin
- Above £52,000: RPI + 3%
The interest is added to your balance daily. The deduction stays at 9% above threshold — interest accrual doesn't change the monthly deduction.
For 2026/27, RPI is volatile, with reported figures varying through the year. The Student Loans Company publishes current rates monthly. Recent ranges have been 4–7% depending on phase.
When Plan 2 writes off
30 years from the April you first became repayable. For someone who graduated in:
- 2014: write-off in April 2045
- 2020: write-off in April 2051
- 2023 (last Plan 2 cohort): write-off in April 2054
After write-off, the balance disappears. No further interest, no penalty, no credit impact.
Read more about write-off rules →
The salary-sacrifice optimisation
For Plan 2 borrowers near the threshold, salary sacrifice into pension is the highest-leverage move:
Example: £30,000 salary, Plan 2 borrower
Without sacrifice: - Above £28,470 = £1,530 × 9% = £138/year student loan
With 6% sacrifice (£1,800 to pension): - Threshold-relevant income: £28,200 - Below threshold → £0 student loan
The £1,800 sacrifice puts £1,800 into pension, saves £138 in student loan, plus ~£500 in Income Tax + NI. Net cost to take-home: roughly £1,160 for £1,800 in pension.
This effect amplifies for higher-rate Plan 2 borrowers earning above £50,270 — every £1 sacrificed saves 42p in Income Tax + NI plus 9p in student loan = 51p effective tax saved per £1 of pension contribution.
Read more about salary sacrifice →
Should I pay off Plan 2 early?
Generally not, for these reasons:
- 30-year write-off means many borrowers won't repay in full
- Interest doesn't change deduction — extra interest just sits on the balance, written off at year 30
- Money invested elsewhere often returns more than the Plan 2 interest avoided
- Cash flow flexibility preserved by not committing to overpayments
Exceptions: - You earn well above £50,000 and project to repay in full - You're near the write-off date with a small balance - You're moving abroad and want to clear UK debt before relocating
Always model specific circumstances; not advice.
Plan 2 abroad
If you move overseas:
- You must declare income to Student Loans Company (SLC)
- 9% above the equivalent local threshold is required
- Failure to declare can result in penalty rates and aggressive collection
Many overseas Plan 2 borrowers comply via SLC's online account. The threshold equivalent is set per country (typically slightly above the UK threshold).
In short
Plan 2 student loans repay at 9% above £28,470 for 2026/27, per pay period. Applies to 2012–2023 starters in England and Wales — the largest active borrower cohort. 30-year write-off. Interest is variable RPI to RPI + 3% depending on income. Use the take-home calculator → to model. For the full reference, see the student loans hub →.