Student Loan Deduction

A student loan deduction is a repayment collected through payroll once your earnings pass the threshold for your plan. It is not a tax and it is not interest: it is a percentage of the pay above the threshold in that pay period, and it stops when the balance is cleared or the loan is written off.

Which plan you are on depends on where and when you studied, not on what you owe. For 2026/27, Plan 1 takes 9 per cent of earnings above £26,900, Plan 2 above £29,385, Plan 4 above £33,795 and Plan 5 above £25,000. A Postgraduate Loan takes 6 per cent above £21,000, and it runs alongside an undergraduate plan rather than replacing it, so a borrower with Plan 2 and a Postgraduate Loan is deducted on both, from two separate thresholds, in the same payslip.

The calculation is per pay period, like National Insurance and unlike income tax. The annual threshold is converted to a monthly or weekly figure and the deduction is worked out on that period's pay alone, with no year-to-date reconciliation. A bonus month therefore produces a deduction that would not have arisen had the same money been spread across the year, and payroll cannot refund it. Only the Student Loans Company can, after the year has ended, and only where your total annual income came in below the threshold.

Two things go wrong often enough to be worth checking every year. The first is the plan type: an employer that has not been told which plan you are on defaults to Plan 1, which has a lower threshold than Plan 2 or Plan 4 and therefore takes more. The second is deductions continuing after the loan has been repaid, because the stop notice reaches the employer some weeks after the final payment. Both appear on the payslip as a single unlabelled line, so compare the plan shown there against the plan in your Student Loans Company account.