23 June 2023
Plan 5 is a new repayment plan being introduced for students starting undergraduate and advanced learner loan courses on or after 1 August 2023.
Very aptly called plan 5, people won’t be expected to make repayments until April 2026 at the earliest, even if someone leaves a course early.
Repayments will start for income earned over the threshold. For the tax year 2026/27 in the UK this will be:
- £25,000 per annum, or
- £2,083 per month, or
- £480 per week.
If the income falls below the repayment threshold, repayments will stop and only restart when the income is over the threshold again. Additional voluntary repayments can also be made to the Student Loans Company (SLC) at any time.
A rate of 9% applies to repayments for income over the repayment threshold. If income changes, repayment amounts will automatically change to reflect this. The table below has been taken from HM Revenue and Customs (HMRC) guidance.
| Income each year before tax | Monthly income before tax | Approximate monthly repayment |
| £25,000 | £2,083 | £0 |
| £28,000 | £2,333 | £22 |
| £29,500 | £2,458 | £33 |
| £31,000 | £2,583 | £45 |
| £33,000 | £2,750 | £60 |
Repayments will be collected through the UK tax system for employees or through self- assessment if someone is self-employed.
There are circumstances where student loans may be cancelled and never have to be paid back. For plan 5, any loan plus interest remaining 40 years after someone is due to start making repayments, will be cancelled. Resulting in a longer repayment period for more graduates to repay their loans in full. However, all repayments due based on the income until that date, must be made. If not, in some cases, SLC may recover any amounts still owed up to that date.
The interest rate will normally be set at the Retail Price Index (RPI) only, which is a measure of inflation. It measures changes to the cost of living in the UK. The most accurate and up-to-date information on interest rates can be found, here.
Payroll professionals, employers and acting agents need to be prepared for this new way in which student loans are repaid.
Further information on cancellation of loans, credit balances on fully repaid loans, travelling or working overseas, and more can be accessed, here.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.