Student Loans Explained: What You Need to Know in 2026

Have you been thinking about taking a student loan in the UK? With tuition fees and living costs rising, student loans are how most people fund university or postgraduate study. But UK student loans work very differently from normal debt, and the rules changed again for the 2026/27 tax year.

This guide explains student loans in 2026, how repayments work, how much you’ll repay, interest rates, write-off rules, and what’s changed, so you can make informed financial decisions before you borrow.

Student loans are issued by the Student Loans Company and repaid through the tax system. You only repay when you earn above a certain amount, and repayments are based on income, not how much you owe.

The key thing to understand is that which student loan plan you’re on matters, because each plan has different repayment thresholds, interest rates, and write-off periods.

Your student loan plan depends on when you started your course, not when you graduated. For the 2026/27 tax year, the main UK student loan plans are:

• Courses started before September 2012
• Repayment threshold – £26,900 per year

• Courses started between September 2012 and July 2023
• Repayment threshold – £29,385 per year

• For courses that started from August 2023 onwards
• Repayment threshold – £25,000 per year

• Master’s or PhD loans
• Repayment threshold – £21,000 per year

If you earn below your plan’s threshold, you won’t make student loan repayments that year.

A common question we hear is, “How much will I actually repay?”

In the UK, student loan repayments are income-based:

• 9% of income above the threshold for Plan 1, Plan 2 and Plan 5
• 6% of income above the threshold for postgraduate loans

For example, if you’re on a Plan 2 student loan and earn £32,000 in 2026:

• Threshold: £29,385
• Repayable income: £2,615
• Annual repayment is about £235

Repayments are taken automatically through PAYE if you’re employed. If your income falls below the threshold, repayments stop.

Yes, student loans charge interest, and this starts building from the day the loan is paid to you.

• Plan 1 (1998–2012 courses) – Interest is the lower of RPI or Bank Base Rate + 1%. As RPI is 3.2%, the maximum interest rate is 3.2% for this period.
• Plan 2 (2012–2023 courses) – Interest ranges from RPI (3.2%) to RPI + 3% (6.2%).
  While studying, interest is charged at RPI + 3%, and after leaving, it varies based on income.
• Plan 5 (from 2023 courses) – Interest is charged at RPI only (3.2%), with no additional percentage.
• Postgraduate Loans (Plan 3) – Interest is charged at RPI + 3%, giving a maximum rate of 6.2%.

Interest rates can change during the year, so it’s worth keeping an eye on official updates.

You don’t start repaying straight after university.

For most borrowers, student loan repayments begin the April after you finish your course, once you earn above your plan’s threshold.

A key 2026 update:

Plan 5 borrowers won’t start repaying until April 2026 at the earliest, regardless of when they leave their course.

This often catches people out, especially those starting work quickly after graduation.

One of the most misunderstood parts of student loans is that they don’t last forever.

Write-off periods depend on your plan:

• Plan 1, Plan 2 and Postgraduate loans – Written off 30 years after repayments are due to start
• Plan 5 loans – Written off after 40 years

If you haven’t fully repaid by then, the remaining balance will be wiped, even if you still owe a large amount.

For the 2026/27 tax year, the main changes are updated repayment thresholds:

• Plan 1 threshold increased to £26,900
• Plan 2 threshold set at £29,385
• Plan 5 remains at £25,000
• Postgraduate threshold remains at £21,000

It’s also worth noting that some thresholds are expected to be frozen in future years, meaning more graduates may repay more over time as salaries rise, something to factor into long-term financial planning.

Before you apply for a student loan, ask yourself:

• Which student loan plan will I be on?
• How much do I actually need to borrow?
• How will repayments affect my future income?
• Do I understand how interest works?
• Should I get professional advice?

Student loans are common, but they still shape your finances for decades.

Understanding UK student loans in 2026 doesn’t need to be overwhelming, but it does require clarity. The right advice now can help you avoid surprises later, especially as repayment rules and thresholds continue to evolve.

If you’re unsure which plan applies to you, how much you’ll repay, or how a student loan fits into your wider financial picture, speak to a professional adviser.

Need help understanding your student loan or planning your finances?

Get in touch today!

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