Student Loan Repayment Threshold 2027: What You Will Actually Pay Each Month on a London Salary

Which Student Loan Repayment Plan Are You On?

Before you look at any threshold, you need to know your plan. Your repayment plan is set by when and where you started your course. You cannot choose it or switch between them.

If you started a course at a London university in September 2024, you are on Plan 5. If you graduated back in 2020, you are on Plan 2. And if you have both an undergraduate and a postgraduate loan, you repay both simultaneously once you earn above both thresholds.

Student Loan Repayment Threshold 2027: Every Plan Compared

This is the table you actually need. Most guides give you one year’s numbers. This one puts 2026/27 and 2027/28 side by side so you can see exactly what is changing and what is staying the same.

*Not yet officially confirmed for 2027/28. Figures shown are the current 2026/27 amounts carried forward. Plan 4 is set by the Scottish Government and may be revised. Plan 5 is expected to rise with RPI. Check GOV.UK for confirmed figures closer to April 2027. Sources: Department for Education announcement, GOV.UK Student Loan Repayment.

The big headline is Plan 1 going up and Plan 2 staying frozen. If you are on Plan 1, you get a small break. You will not start repaying until you earn £28,005, which means slightly more take-home pay. But if you are on Plan 2, your threshold is stuck at £29,385 for the next three years while your salary (hopefully) rises with inflation. That gap means you pay more each year without the threshold moving to match.

What You Actually Pay Each Month on a London Salary

Thresholds are meaningless until you see the actual pounds coming out of your pay. The formula is simple: take your annual salary, subtract your threshold, multiply by 9% (or 6% for Postgraduate), and divide by 12. That is your monthly deduction.

Here is what it looks like at real London graduate salaries, using the 2027/28 thresholds.

Calculated as: (salary minus threshold) x repayment rate / 12, rounded to nearest pound. Plan 1 uses the 2027/28 threshold of £28,005, Plan 2 uses £29,385 and Plan 5 uses £25,000. Postgraduate uses £21,000 at 6%.

Look at the £35,000 row. That is close to the median London graduate salary after a couple of years of work. A Plan 5 graduate pays £75 a month while a Plan 2 graduate pays £42. That is £33 more per month, £396 more per year, simply because Plan 5 has a lower threshold. And Plan 5 graduates repay for 40 years instead of 30.

If you have both an undergraduate and a postgraduate loan, add the two columns together. On £40,000 with Plan 2 plus a Postgraduate Loan, you pay £80 plus £95, which is £175 per month total.

The Plan 2 Threshold Freeze and What It Costs London Graduates

This is the change that affects the largest number of graduates. The 2025 Autumn Budget announced that the Plan 2 repayment threshold will be frozen at £29,385 from April 2027 until April 2030. That is three years where the threshold does not move, while salaries rise with inflation.

The effect is called fiscal drag. Your salary goes up but the threshold stays flat, so a bigger portion of your income falls above the line each year. You pay more without any change to the rules.

What the Freeze Costs at London Salaries

Say you are a Plan 2 graduate earning £35,000 in London right now. With 3% annual pay rises (roughly matching recent UK wage growth), here is what happens over the three frozen years.

Assumes 3% annual salary growth and 3% annual threshold uprating if the freeze were not in place. “Extra vs Inflation-Linked” is the difference between what you actually pay and what you would have paid if the threshold rose with inflation at 3%.

On a £35,000 starting salary, the freeze costs around £487 extra over three years. On a £50,000 salary it is closer to £800 extra. Not enormous in isolation, but remember this is money that would otherwise never have been taken. And according to the Institute for Fiscal Studies, the average Plan 2 borrower will repay around £3,000 more over the full lifetime of their loan because of this freeze.

Student Loan Interest Rates for 2027

Interest works differently depending on your plan. This is the thing that catches most people out, because Plan 2 has a sliding scale that charges higher earners more interest, while Plan 5 keeps it flat.

RPI rate as of the latest published figure. Interest rates update annually. Source: GOV.UK.

Plan 5 is simpler. You always pay RPI regardless of how much you earn. Plan 2’s sliding scale means a London graduate earning £55,000 is charged 6% interest, which can make the balance grow faster than repayments reduce it. But here is the thing most people miss: for the majority of graduates, the loan gets written off before it is fully repaid anyway. The interest rate matters most if you are likely to clear the full balance, and that only happens at higher salaries.

When Your Student Loan Gets Written Off in London

Your student loan does not last forever. Whatever you have not repaid after a set number of years gets cancelled. You owe nothing more. Here are the write-off periods for each plan.

Plan 5 is the outlier at 40 years. If you started university at 18 and graduated at 21, your Plan 5 loan runs until you are 62. That is close to retirement age. Plan 2 graduates get their remaining balance wiped at around age 51. So even though Plan 5 has a lower interest rate, you are repaying for a decade longer.

For mature students in London who start at 30 or 35, the write-off happens later in life. A 35-year-old Plan 5 starter would be repaying until age 79. In practice, most people’s balances get written off long before that because repayments outpace the balance as salaries grow. But it is worth understanding the maximum window. You can read more about how student finance works specifically for mature students in London.

What Happens to Your Student Loan If You Leave the UK

If you move abroad after graduating, your student loan does not disappear. You still owe it. But the repayment mechanism changes completely.

In the UK, repayments happen automatically through PAYE on your payslip. Abroad, there is no PAYE. Instead, the Student Loans Company sets a fixed monthly amount based on your overseas income and the cost of living in that country. You have to provide income evidence every year and make payments directly to the SLC.

The thresholds used overseas are different from UK thresholds. They are country-specific and published by the SLC annually. Some countries have lower thresholds than the UK, so you could end up repaying on a lower salary than you would here.

For Graduates with UK Immigration Status

If you received student finance as a refugee, ILR holder, or EU settled status holder and later move abroad, the same overseas repayment rules apply. Your eligibility status determined whether you could access the loan. Your repayment obligation works the same as any other UK graduate. The loan stays with you regardless of whether your immigration status changes after graduation.

If your immigration status changed during your course and you are unsure how it affects your finance, you can read our guide on what happens when your ILR or settled status changes during your course.

Understanding Your Full Student Finance Package in London

If you are reading this because you are thinking about starting university, the repayment threshold is only half the picture. The other half is understanding what you can actually receive while you study. London students get the highest maintenance loan rates in the country, up to £14,135 for 2026/27, and there are grants on top of that which you never have to repay.

The maintenance loan for London students in 2026/27 is assessed on household income, and if you are 25 or over, only your own income counts. Parents with children can add the Childcare Grant and Parents’ Learning Allowance. And most London universities offer bursaries based on your immigration status and income that do not need repaying either.

If you are on Universal Credit and wondering how it interacts with student finance, or if you are a refugee exploring student finance eligibility, we have detailed guides covering those exact situations.

At Wilor Education, we offer a free eligibility check that maps out your complete funding package: tuition loan, maintenance loan, grants, bursaries, and benefits. It takes about 15 minutes and covers every funding source you may be entitled to based on your specific circumstances, immigration status, and where you live in London. You can book a free consultation here.

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FAQ: Student Loan Repayment Threshold 2027