How and when do I pay back my Plan 2 student loan?

Updated on 20 October 2020

Students

First up, check this guidance is for you. Do you have a Plan 2 loan? This page only covers Plan 2 income-contingent student loans. There are separate pages for Plan 1 loans and postgraduate loans.  

You should contact the Student Loans Company (SLC) if you are unsure which type of loan you have. 

Illustration of a student in front of a graduation cap and a student loan document
(c) Shutterstock / Siberian Art

How much are Plan 2 student loan repayments?

Plan 2 repayments started from April 2016, in very basic terms, student loan repayments are due at a rate of 9%:

  • on your earnings over £26,575 a year (from 6 April 2020 to 5 April 2021; for 2019/20 the threshold was £25,725), whether from employment or self-employment
  • on other income over £2,000 a year if you are required to fill in a tax return under Self Assessment.

How are Plan 2 student loans paid back?

There are basically three ways of repaying:

  • through your wages, under Pay As You Earn (PAYE)
  • through HM Revenue & Customs’ (HMRC’s) Self Assessment system
  • direct to the Student Loans Company (SLC).

How do you know which one (or more than one, in some cases) applies to you? Use the table below as a guide.

Would you answer 'yes' to the questions below?

  Then your student loan will be repaid
  by:

Are you employed in the UK?

→ 

PAYE

Are you self-employed in the UK?

→ 

Self Assessment

Do you have other income (for example rents) and HMRC ask you to fill in a tax return?

→ 

Self Assessment

Are you employed and self-employed?

PAYE and Self Assessment (but you don't pay twice: sums taken under PAYE come off your Self Assessment bill)

Are you going or have you gone abroad?

Direct payments to the SLC

Have you nearly repaid your loan in full?

Possible opt out of PAYE deductions and switch to a direct debit to the SLC

Do you want to make extra payments direct to the SLC?

Direct payments to the SLC
⚠️ Caution: warning below


⚠️ If you make voluntary or extra payments to the SLC, this does not reduce any amount that you might owe under PAYE or Self Assessment. Instead, you pay off your loan faster.

When do I start paying back my Plan 2 student loan?

You will usually start repaying your loan at thestart of the tax year after you finish or leave your course.

Students: when to start repaying your student loan [2050] by LITRG

But payments only start if you earn over the ‘repayment threshold’. Your earnings are calculated before taking off tax or National Insurance contributions (NIC).

The first repayments for Plan 2 loans started in April 2016 and the repayment threshold for the 2020/21 tax year (the tax year to 5 April 2021) is £26,575. The repayment threshold for the 2019/20 tax year was £25,725 and before the 2019/20 tax year the repayment threshold was £25,000.

The subsequent pages explain the various ways of collecting repayments and how they are calculated for:

  • Employees, repaying via Pay As You Earn (PAYE)
  • The self-employed and other taxpayers who are asked to complete a Self-Assessment tax return
  • Borrowers who go abroad

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