Plan 5 introduced for students starting university in 2023-24

Students who began university in England in 2023-24 borrow under a new student loan plan, Plan 5, introduced as part of a government reform of the system¹. The change followed forecasts that only 27% of full-time undergraduates who started courses in 2022-23 would repay their loans in full, a figure Which? describes as one of the reasons the government reformed the system¹.

Under Plan 5, borrowers see their interest rise by RPI only, rather than RPI plus 3%, once the interest rate cap is lifted¹. The plan also has a lower repayment threshold than Plan 2, and debt is not written off until after 40 years, compared with 30 years on Plan 2¹. The government anticipates that those starting university in 2023-24 on Plan 5 will have £42,900 of debt when they finish, and that around 61% of them would be able to repay in full¹.

The 7.8% interest rate cap that applies to Plan 2 also applies to Plan 5 and to postgraduate Plan 3 loans¹. That cap is reviewed monthly and was up 0.9 of a percentage point from March 2023, when it was 6.9%¹. For Plan 2 borrowers, interest while studying, and until the April after the course finishes, is usually RPI plus 3%, set on 1 September each year using the Retail Price Index from the previous March¹.

Repayment thresholds and terms differ by plan:

Plan	Repayment threshold	Repayment rate	Write-off period
Plan 2	£27,295 before tax and deductions	9% of income over the threshold	30 years
Plan 5	Lower than Plan 2 (figure not given)	Not stated	40 years
Postgraduate (Plan 3)	£21,000	6% of income over the threshold	30 years
Plan 1	Not stated	Not stated	25 years
Plan 4	Not stated	Not stated	30 years

Source: Which?¹. The sources do not give the Plan 5 threshold figure or its repayment rate.

"Those on Plan 5 will only see their interest increase by RPI (as opposed to RPI plus 3%, and once the interest rate cap is lifted), have a lower repayment threshold and their debt won't be wiped until after 40 years (rather than 30)."

Which?¹

Why it matters for households

Repayments are collected through the PAYE tax system, so they are deducted automatically and sent to HMRC before a borrower receives their salary¹. Graduates become eligible to repay from the April after their course finishes¹. For Plan 2 borrowers, repayment starts only on earnings above £27,295 before tax and deductions, with 9% of income above that threshold paid back¹. Postgraduate loan holders repay from £21,000, at 6% of income above it¹.

The longer write-off period on Plan 5 means debt can remain outstanding for 40 years rather than 30, and the lower threshold means repayments begin at a lower salary than under Plan 2¹. The interest cap of 7.8% applies across Plan 2, Plan 5 and postgraduate Plan 3 loans¹.

Borrowers who move abroad for more than three months must update their employment details with the Student Loans Company and continue repaying unless they can provide evidence their income is below the threshold¹. Failure to update details can lead to arrears that must be repaid even where income is below the threshold¹. Those who do not give the SLC the information it needs must pay a fixed monthly amount¹.

Overpayments can be refunded in four scenarios: over-repayment, below-threshold refunds, being placed on the wrong plan type, and early repayment refunds¹. In 2022-23, overpayment refunds totalled more than £23.4m, with nearly 58,000 people paying too much; around £21.9m had been refunded, at an average of £406¹.