What are the Plan 1 student loan rules for 2026/27?
In the 2026/27 tax year, the UK Plan 1 student loan repayment threshold is £26,900 per year (£2,241.66 per month). Borrowers repay exactly 9% of gross earnings above this threshold through PAYE. Interest is capped at the lower of RPI or the Bank of England base rate plus 1.0%. Loans for courses started before 1 September 2006 are written off at age 65, while courses started on or after that date are cancelled after 25 years.
Key Statutory Plan 1 Parameters (2026/27)
- Annual Repayment Threshold: £26,900 per tax year (confirmed by the Department for Education).
- Monthly / Weekly Thresholds: £2,241.66 per month · £517.30 per week (deductions assess pay periods in isolation).
- Statutory Repayment Rate: 9% on gross earnings exceeding the threshold.
- Statutory Interest Cap: Lower of Retail Price Index (RPI) or Bank of England Base Rate + 1.0%.
- Pre-September 2006 Starters: Complete debt cancellation and write-off at age 65.
- Post-September 2006 Starters: Complete cancellation 25 years after the statutory repayment date (April after graduation).
Calculate Your Monthly Plan 1 Deductions
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What Is a Plan 1 Student Loan and Who Holds One?
Plan 1 is the original income-contingent student loan structure introduced in the United Kingdom under the Teaching and Higher Education Act 1998, replacing the previous system of fixed-term mortgage-style loans. Administered by the Student Loans Company (SLC) alongside HM Revenue and Customs, Plan 1 loans were issued to higher education students across two distinct demographic cohorts:
- England and Wales Starters (1998 to 2011): Undergraduate students funded by Student Finance England or Student Finance Wales who began their university courses between 1 September 1998 and 31 August 2011 (prior to the introduction of £9,000 tuition fees under Plan 2).
- Northern Ireland Undergraduates (1998 to Present): All undergraduate students funded by Student Finance Northern Ireland who commenced higher education studies on or after 1 September 1998, including students starting courses today.
If you studied in Scotland under the Student Awards Agency for Scotland (SAAS), your loan was historically classified alongside Plan 1, but in April 2021 SAAS borrowers were formally transitioned into a separate Plan 4 framework with a higher repayment threshold (£33,795 in 2026/27). For English and Welsh graduates who attended university between 1998 and 2011, or Northern Irish graduates of any vintage, Plan 1 remains the governing statutory contract for your student debt.
To see how Plan 1 compares against newer loan structures—including Plan 2 (£29,385 threshold), Plan 4 (Scotland), Plan 5 (£25,000 threshold for post-2023 English students), and Postgraduate loans—consult our definitive master overview of student loan repayment plans.
How Plan 1 Repayments Are Calculated in 2026/27
Plan 1 repayments function essentially like a graduate income tax surcharge rather than traditional commercial debt. Deductions are handled automatically by your employer through the PAYE payroll mechanism under Section 16 of the Education (Student Loans) (Repayment) Regulations 2009.
In the 2026/27 tax year, the statutory repayment threshold is £26,900 per year, which translates to exact payroll increments of:
- Annual Threshold: £26,900.00
- Monthly Threshold: £26,900 ÷ 12 = £2,241.66 per month
- Weekly Threshold: £26,900 ÷ 52 = £517.30 per week
Every pay period, your employer assesses your gross pay subject to Class 1 National Insurance. If your earnings in that specific pay period exceed the threshold, your employer deducts exactly 9% of the excess before transferring your net take-home pay to your bank account. If your gross pay in a given month is less than £2,241.66, zero student loan repayment is deducted.
| Annual Salary | Gross Monthly Pay | Monthly Earnings Above £2,241.66 | Monthly Plan 1 Deduction (9%) | Annual Plan 1 Repayment |
|---|---|---|---|---|
| £25,000 | £2,083.33 | £0.00 | £0.00 | £0.00 |
| £30,000 | £2,500.00 | £258.34 | £23.25 | £279.00 |
| £35,000 | £2,916.67 | £675.01 | £60.75 | £729.00 |
| £40,000 | £3,333.33 | £1,091.67 | £98.25 | £1,179.00 |
| £50,000 | £4,166.67 | £1,925.01 | £173.25 | £2,079.00 |
| £60,000 | £5,000.00 | £2,758.34 | £248.25 | £2,979.00 |
| £75,000 | £6,250.00 | £4,008.34 | £360.75 | £4,329.00 |
Critically, the size of your outstanding loan balance has absolutely zero influence on your monthly repayment amount. Whether you owe £1,500 or £45,000, an employee earning £40,000 per year pays exactly £98.25 per month. The only factor governing your monthly deduction is your income.
The Plan 1 Low-Interest Rate Cap: How Interest Is Calculated
One of the most valuable statutory protections embedded in the Plan 1 agreement is the “low interest cap” governed by Regulation 21 of the Repayment Regulations. Unlike commercial bank loans or modern Plan 2 student loans (which charge interest up to RPI + 3.0%), Plan 1 interest is strictly constrained by primary legislation.
Under statutory rules, the interest rate applied to your Plan 1 balance is set at whichever is lower:
- The Retail Prices Index (RPI): The rate of inflation measured in the 12-month period to March of the preceding calendar year.
- The Bank of England Base Rate + 1.0%: The current benchmark monetary policy rate determined by the Monetary Policy Committee plus 100 basis points.
This statutory mechanism protects borrowers during periods of severe macroeconomic instability. When inflation spiked to over 10% in 2022 and 2023, modern Plan 2 borrowers saw their theoretical interest rates skyrocket toward 7% and 8%, but Plan 1 borrowers remained shielded by the Bank of England base rate cap. Conversely, during the prolonged post-financial-crisis era when the Bank Rate sat at 0.5% or 0.1%, Plan 1 interest plummeted to historic lows between 1.1% and 1.5%. Because of this statutory cap, Plan 1 debt is widely considered by independent financial advisors to be the cheapest debt available in the United Kingdom.
Statutory Write-Off Rules: Pre-2006 vs Post-2006 Starters
A critical legal distinction that every Plan 1 borrower must verify on their original Student Loans Company paperwork is their exact course start date. The United Kingdom operated two distinct write-off regimes for Plan 1 borrowers:
| Cohort Classification | Course Start Date | Statutory Cancellation / Write-Off Trigger | Governing Legislation |
|---|---|---|---|
| Pre-2006 Starters | Began higher education before 1 September 2006 | Written off in full when the borrower reaches age 65 (or upon permanent disability or death). | Education (Student Loans) (Repayment) Regulations 2000 (Reg 13) |
| Post-2006 Starters | Began higher education on or after 1 September 2006 | Written off in full 25 years after the April following graduation / course completion. | Education (Student Loans) (Repayment) Regulations 2009 (Reg 18) |
1. Pre-September 2006 Starters (The Age 65 Rule)
If you commenced your degree studies in England, Wales, or Northern Ireland prior to 1 September 2006, your contract does not contain a fixed 25-year or 30-year term. Instead, your balance remains active until your 65th birthday. If you graduate at age 21, your loan can theoretically remain live for up to 44 years. If any unpaid balance remains on your 65th birthday, the Student Loans Company writes off 100% of the remaining capital and interest immediately, with no tax liability arising on the forgiven debt.
2. Post-September 2006 Starters (The 25-Year Rule)
If your course began on or after 1 September 2006 (for example, starting in autumn 2006, 2007, 2008, 2009, 2010, or 2011), the government amended the statutory terms to introduce a fixed 25-year cancellation window. Your 25-year countdown begins on the “statutory repayment-due date”, which is the 6 April following the date you graduated or left your course.
For example, if you enrolled in a three-year undergraduate degree in September 2006 and graduated in June 2009, your statutory repayment date was 6 April 2010. Exactly 25 years later—on 6 April 2035—any balance remaining on your account will be permanently cancelled by the Student Loans Company. Explore full cross-plan write-off rules and cancellation mechanics in our dedicated guide to when student loans are written off.
Plan 1 vs Plan 2: Key Differences and Comparison
The transition from Plan 1 to Plan 2 in September 2012 represented the most radical shift in UK higher education funding in history, tripling maximum tuition fees from £3,375 to £9,000 per year. Comparing the two frameworks highlights why Plan 1 borrowers occupy a distinct financial position:
| Plan Feature | Plan 1 (Pre-2012 England/Wales; All NI) | Plan 2 (2012 to 2023 England/Wales) |
|---|---|---|
| Repayment Threshold (2026/27) | £26,900 per year (£2,241.66/mo) | £29,385 per year (£2,448.75/mo) |
| Repayment Rate | 9% of gross income above threshold | 9% of gross income above threshold |
| Typical Graduate Debt Balance | £15,000 to £25,000 | £45,000 to £65,000+ |
| Statutory Interest Formula | Lower of RPI or Bank Rate + 1.0% | RPI while studying; RPI to RPI + 3.0% post-study |
| Cancellation / Write-Off Period | Age 65 (pre-2006) or 25 years (post-2006) | 30 years after repayment start date |
| Likelihood of Full Repayment | High (most full-time earners clear balance) | Low (over 70% of graduates will not clear debt) |
Because Plan 1 tuition fees were capped at £1,000 to £3,375 per year, total student debt balances for Plan 1 graduates were vastly smaller than modern students. Consequently, a substantial majority of Plan 1 borrowers who remain in continuous full-time employment actually pay off their loans in full within 10 to 18 years of graduating, whereas most Plan 2 borrowers will never repay their principal before the 30-year write-off expires.
Should You Make Voluntary Overpayments on a Plan 1 Loan?
Unlike modern Plan 2 or Plan 5 loans, where voluntary overpayments are almost universally discouraged as wasted money, deciding whether to voluntarily overpay a Plan 1 loan involves a nuanced financial calculation:
1. When Overpaying Plan 1 Makes Mathematical Sense
Because Plan 1 loan balances are relatively modest (often under £10,000 for mid-career professionals), many borrowers will indisputably pay off the loan in full before reaching age 65 or their 25-year cancellation date. If your salary is £45,000, your mandatory PAYE deduction is £1,629 per year. If your remaining balance is £4,000, you will clear the debt within approximately 2.5 years through standard payroll deductions.
In this scenario, if your surplus cash is earning 4.0% in a taxable savings account where you pay 40% higher-rate tax (net yield 2.4%), while your Plan 1 loan is accumulating interest at 4.5% or 5.0%, overpaying the student loan generates a guaranteed, tax-free return equal to the saved loan interest. Clearing the loan immediately also removes the 9% monthly salary deduction, boosting your monthly disposable cash flow.
2. When Overpaying Plan 1 Is a Critical Financial Error
Overpaying a Plan 1 loan is a severe mistake under the following circumstances:
- You Have Expensive Commercial Debt: If you hold credit card balances at 22%, personal loans at 8%, or car finance at 9%, repaying a cheap Plan 1 student loan is economically irrational. Always eliminate high-interest commercial debt first.
- You Lack an Emergency Cash Reserve: Once you make a voluntary repayment to the Student Loans Company, the money is permanently gone. You cannot re-borrow from the SLC if you lose your job or face an emergency home repair. Maintain at least 3 to 6 months of living expenses in a flexible Cash ISA first.
- You Are a Lower Earner Nearing Write-Off: If your earnings hover near £26,900 and you commenced your course after September 2006, you may be within 5 to 10 years of your 25-year cancellation milestone. Any voluntary payments made toward a loan that will eventually be written off for free represent pure dead-weight financial loss.
The Final Year Direct Debit Scheme: Avoiding Overpayments
A major systemic flaw in the UK payroll system is that HMRC transmits student loan repayment data to the Student Loans Company on a delayed basis. If you continue repaying through PAYE right up to the end of your balance, your employer will almost certainly continue deducting 9% from your salary for several months after your balance has reached zero, requiring you to contact SLC to claim a refund.
To prevent this, the Student Loans Company operates the Direct Debit Scheme. When you are within 12 months of fully clearing your Plan 1 balance, the SLC will contact you by letter or email, inviting you to switch from PAYE payroll deductions to a direct debit from your current account. Once you switch, HMRC instructs your employer to cease student loan payroll deductions immediately. You make fixed monthly direct debit payments directly to SLC, and the direct debit stops automatically the exact month your loan balance hits zero, completely eliminating payroll over-deductions.
Salary Sacrifice and Student Loan Repayments
Because Plan 1 student loan deductions are calculated strictly on earnings subject to Class 1 National Insurance, making pension contributions via salary sacrifice directly reduces your monthly student loan deductions.
Under a salary sacrifice (salary exchange) arrangement, your contracted gross cash salary is reduced before National Insurance is calculated. Because your gross NI-able pay drops, your student loan liability decreases by exactly 9% of the sacrificed amount. For example, if you earn £40,000 and sacrifice £3,000 of your salary into your workplace pension, your gross assessable pay drops from £40,000 to £37,000. Your annual Plan 1 student loan deduction drops from £1,179.00 to £909.00, saving you £270.00 in cash per year in addition to your Income Tax and National Insurance savings!
Work out your exact monthly Plan 1 repayments across all salary levels with our free student loan repayment calculator, explore statutory cancellation milestones in our guide to when student loans are written off, or evaluate the full landscape of English, Scottish, and Welsh plans in our guide to student loan repayment plans.
Frequently Asked Questions: Plan 1 Student Loans 2026/27
What is the Plan 1 student loan repayment threshold for 2026/27?
For the 2026/27 tax year, the Plan 1 student loan repayment threshold is £26,900 per year. This equates to exactly £2,241.66 per month or £517.30 per week before tax. If your gross earnings sit at or below £26,900, you make zero student loan repayments. On any gross earnings above £26,900, you repay exactly 9% of the excess.
When will my Plan 1 student loan be completely written off?
Plan 1 write-off rules depend on when your higher education course started. If you took out your first loan for a course that started before 1 September 2006, your entire outstanding loan balance (including all accrued interest) is cancelled and written off when you reach age 65. If your course started on or after 1 September 2006, your loan is cancelled 25 years after the statutory repayment date (the April after you left your course).
How is interest calculated on Plan 1 student loans in 2026/27?
Interest on Plan 1 loans is governed by the ‘low interest cap’ under The Education (Student Loans) (Repayment) Regulations 2009. By statute, the interest rate charged on Plan 1 loans is set at whichever is lower: the Retail Prices Index (RPI) inflation rate or the Bank of England Base Rate plus 1.0%. This statutory cap ensures Plan 1 borrowers are protected from runaway interest surges during high-inflation periods.
Does making voluntary repayments on a Plan 1 student loan reduce my monthly PAYE deductions?
No. Voluntary lump-sum repayments reduce your overall principal balance, but they do not lower your mandatory monthly PAYE deductions. Your employer’s payroll software is legally required by HMRC to deduct 9% of all earnings above £2,241.66 per month regardless of how much you have paid voluntarily, right up until the Student Loans Company notifies HMRC that the balance has reached zero.
Can I have both a Plan 1 undergraduate loan and a Postgraduate loan at the same time?
Yes. If you took an undergraduate degree under Plan 1 and subsequently completed an eligible Master’s or Doctoral course funded by Student Finance England or Student Finance Wales, HMRC will deduct repayments for both schemes concurrently. You will repay 9% of earnings above £26,900 for your Plan 1 loan, plus 6% of earnings above £21,000 for your Postgraduate loan, creating a combined 15% student loan deduction on earnings above £26,900.
What happens to my Plan 1 student loan if I move abroad or stop working?
If your income falls below £26,900 or you stop working in the UK, your mandatory repayments automatically halt. If you move abroad for more than three months, you must inform the Student Loans Company (SLC) and complete an Overseas Income Assessment form. SLC sets country-specific repayment thresholds based on local price levels, and you must arrange direct repayments if your overseas earnings exceed that country’s threshold.