Student Loan Plan 2
The repayment plan for students who started an undergraduate course in England or Wales from 1 September 2012 onwards. Repayments are 9% of income above the Plan 2 threshold (£29,385 for 2026/27), and the loan is written off after 30 years. Interest accrues at RPI plus up to 3%, making Plan 2 loans more expensive in interest terms than Plan 1.
How it works
Plan 2 applies if you started an undergraduate course in England or Wales from September 2012, which was when tuition fees rose substantially and the government introduced a new repayment structure with a higher threshold to match. Like other plans, repayments are collected automatically through PAYE at 9% of income above the threshold, recalculated every pay period.
Because Plan 2 loans typically carry larger balances than Plan 1, reflecting the higher fees charged from 2012, many borrowers on this plan will never fully repay their loan before the 30-year write-off date, at which point the remaining balance is cancelled regardless of size. This makes Plan 2 behave more like a graduate tax than a conventional loan for a large share of borrowers.
If you have income from more than one job, or a mix of employment and self-employment, your Plan 2 repayment is still based on total income above the threshold for the year, reconciled through Self Assessment if HMRC can't collect the full amount correctly through PAYE alone.
Example: Plan 2 repayment on a £35,385 salary
The Plan 2 threshold is £29,385 for 2026/27. On a salary of £35,385, £6,000 sits above the threshold, so the repayment is £6,000 × 9% = £540 for the year, or £45 a month through payroll.
A pay rise to £41,385 would push £12,000 above the threshold, lifting the annual repayment to £12,000 × 9% = £1,080 — repayments rise in step with income above the line, not with total salary.
Frequently asked questions
Why is the Plan 2 threshold higher than Plan 1's?
The thresholds were set separately when each plan was introduced and have been uprated on different schedules since, so Plan 2's threshold has ended up higher than Plan 1's even though both charge the same 9% rate above their respective thresholds.
Do Plan 2 loans cost more in interest than Plan 1?
Yes — Plan 2 interest accrues at RPI plus up to 3%, a materially higher rate than Plan 1's cap of the lower of base rate plus 1% or RPI, which is one reason Plan 2 balances tend to grow faster before repayments catch up.
Can I have a Plan 2 loan and a Postgraduate Loan at the same time?
Yes, and they're repaid concurrently rather than one after the other — a borrower with both could see combined deductions of 9% plus 6% of income above the relevant thresholds on the same payslip.
Related Terms
Student Loan Plan 1
The earliest student loan repayment plan, applicable to UK students who took out their first loan before 1 September 2012.
Student Loan Plan 4
The repayment plan for Scottish students who took out their first student loan on or after 1 September 1998 under the Student Awards Agency for Scotland.
Student Loan Plan 5
The newest undergraduate repayment plan, applying to students starting courses in England from 1 August 2023 onwards.
Postgraduate Loan
A student loan available to UK residents studying a postgraduate master's or doctoral course, repaid through payroll deductions at 6% of income above the postgraduate repayment threshold (£21,000 per year).
Repayment Threshold
The level of annual income above which you must start making student loan repayments, which differs depending on your loan plan.
SLC
The Student Loans Company — the government-owned company that administers student loans in the UK, including issuing funds to students, collecting repayments through payroll (via HMRC), and managing loan balances.
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