Student Loan Plan 5 Explained: Rules for Post-2023 Grads

Plan 5 is the newest UK student loan repayment plan, applying to most undergraduate students who took Student Finance England funding and started their course on or after 1 August 2023. It does not apply in Wales: Student Finance Wales has no Plan 5, so a Welsh 2023 starter is on Plan 2. It has a substantially lower repayment threshold than Plan 2 and a longer write-off period - meaning more graduates will pay back more of their loan over a longer period than under any previous plan.

This guide explains how Plan 5 works, who's on it, what to check on your payslip, and the specific common errors graduate-employees see in their first year of employment.

To check whether the tax, NI and PAYE lines look right on your own slip, see How do I check my payslip is correct?.

Who is on Plan 5

Your plan is set by which of the four funding bodies you applied to, not by where you live or where you studied. You're on Plan 5 if all of these are true:

1. You applied to Student Finance England.
2. You started your course on or after 1 August 2023, on an undergraduate course, a PGCE, an Advanced Learner Loan, or student finance through the Lifelong Learning Entitlement.
3. You haven't (yet) finished repaying.

You're NOT on Plan 5 if:

• You applied to Student Finance Wales. Welsh undergraduate and PGCE borrowers who started on or after 1 September 2012 are on Plan 2, whatever year they started - there is no Welsh Plan 5.
• You applied to Student Finance England before 1 August 2023 (Plan 2 from 1 September 2012, Plan 1 before that).
• You applied to the Student Awards Agency Scotland (Plan 4).
• You applied to Student Finance Northern Ireland (Plan 1).
• You took a Higher Education Short Course Loan, which is Plan 2 even for a post-2023 starter, or a postgraduate master's or doctoral loan, which is a Postgraduate Loan plan.

This is the commonest thing published guides get wrong about Plan 5, and it costs a Welsh graduate real money: the Plan 2 threshold is £29,385 against Plan 5's £25,000, so a wrongly-applied Plan 5 over-deducts about £33 a month at £30,000. Source: GOV.UK, which repayment plan you're on.

A small number of pre-2023 starters who deferred entry and started in 2023 may be on Plan 2 - your SLC paperwork will tell you which plan applies.

The headline differences vs older plans

The two key Plan 5 features:

1. Lower threshold (£25,000) - repayment kicks in at a lower salary than any other plan.
2. 40-year write-off - Plan 5 loans aren't written off until 40 years after the April you became liable to repay (typically the April after graduation). Plan 2 was 30 years. The combined effect is that more Plan 5 graduates will repay their full loan than any previous plan.

How the deduction is calculated

Plan 5 deducts 9% of earnings above the £25,000 annual threshold, calculated per pay period.

Per pay period: take your gross pay, subtract the pay-period threshold, multiply by 9%, then round the answer down to a whole pound. That last step is why the figure on your slip is a few pence under the exact calculation, and it is why pence on a student loan line are themselves a sign of a mis-configured payroll.

HMRC publishes two Plan 5 pay-period thresholds, and it cuts the fraction rather than rounding it: £2,083.33 monthly and £480.76 weekly. £25,000 divided by 52 is £480.769, so a threshold written as £480.77 is a penny too high. There is no published four-weekly threshold at all. For a four-weekly payroll, SL3 says to divide the pay into four equal weekly amounts, find the deduction due on one of them, and multiply that by four - so the round-down happens once per week rather than once per period.

Worked example - monthly:

Monthly gross pay:               £2,500.00
Less Plan 5 monthly threshold:  -£2,083.33
Earnings above threshold:          £416.67
× 9%:                               £37.50
Rounded down to a whole pound:     £37

Plan 5 deduction this period:      £37

Your payslip should say £37, not £37.50. That is about £444 a year for someone earning £30,000.

Compare against Plan 2 at the same income (Plan 2 threshold £29,385 a year, so £2,448.75 a month):

Monthly gross pay:               £2,500.00
Less Plan 2 monthly threshold:  -£2,448.75
Earnings above threshold:           £51.25
× 9%:                                £4.61
Rounded down to a whole pound:       £4

Plan 2 deduction this period:       £4

Plan 5 is taking about £33 a month more from this graduate than Plan 2 would. Before the round-down, the annual gap is 9% of the difference between the two thresholds: 9% × (£29,385 − £25,000) = £394.65 a year, at any salary above both thresholds. What actually leaves your pay is a few pounds under that, because each period is cut to a whole pound on both plans.

Why payroll often gets Plan 5 wrong

Plan 5 is the newest plan, and many UK payroll systems were initially configured only for Plans 1, 2, 4 and Postgrad. Common errors:

1. Plan 1 used instead of Plan 5. Plan 1 has a much higher threshold (£26,900 vs £25,000) so the under-deduction is small initially, but compounds over the year. By April, the under-deduction is reconciled - sometimes through a large catch-up deduction in a single pay period.
2. Plan 2 used instead of Plan 5. Plan 2 threshold £29,385. The under-deduction is significant - for a £30,000 earner, Plan 2 deducts £4 a month while Plan 5 deducts £37. By year-end SLC may issue a Stop Notice triggering a catch-up.
3. No deduction at all. If your employer's HMRC notification (a Start Notice) hasn't arrived, your payroll system won't deduct anything. The correction comes through the next tax year via Self Assessment or HMRC reconciliation.
4. Postgraduate Loan instead of Plan 5. Different threshold (£21,000) and different rate (6% not 9%). Substantial mis-deduction in either direction.

What to check on your payslip

Your payslip should show:

• A line labelled "Student Loan" or "Plan 5" or "SL5" (terminology varies by employer).
• A figure that matches the (gross pay − £2,083.33) × 9% calculation for monthly, rounded down to a whole pound.
• Consistency from period to period (excluding any reconciliation events).

If your payslip shows:

• No student loan line at all despite earning above £25,000 - payroll doesn't know you have a loan, OR doesn't have your Plan 5 status.
• A line labelled "Plan 1" or "Plan 2" - wrong plan, contact payroll.
• Suddenly large deduction in one period - likely a catch-up after a Stop Notice / Start Notice exchange between SLC and HMRC.
• No deduction in the first 1-2 months of a new job - Start Notice hasn't arrived yet; expect deductions to kick in (and possibly catch up) within 2-3 months.

How to fix wrong-plan payroll

1. Check your SLC online account at student-loans.service.gov.uk - confirm which plan you're on.
2. Email payroll with: "I am on Plan 5 (confirmed via SLC online account dated [DATE]). Please can you verify my plan status in your payroll system and apply the correct plan from the next pay cycle?"
3. If payroll is uncertain, they need a Start Notice (SL1) from HMRC. They can request this through the HMRC employer helpline.
4. Check the next 2-3 payslips to confirm the right plan is applied.

Any over-deduction is automatically refunded by SLC at year-end reconciliation. Any under-deduction is automatically caught up.

Plan 5 + a Postgraduate Loan together

If you have both a Plan 5 undergraduate loan AND a Postgraduate Loan, both deduct in parallel:

• Plan 5: 9% above £25,000 (£2,083.33/month)
• Postgrad: 6% above £21,000 (£1,750/month)

For a £30,000 earner with both:

Monthly gross:                   £2,500.00
Plan 5 deduction:                   £37       (above, after the round-down)
Postgrad deduction:
  £2,500 - £1,750 = £750
  × 6% = £45.00, rounded down to    £45
Combined student loan:             £82/month

Each plan is rounded down on its own and the two results are then added; the round-down is never applied to the combined figure. That's nearly £1,000 a year of student loan repayments on a £30k salary. For higher earners with both loans, the combined cost can exceed £200-300/month.

Will I pay back the whole loan?

Under Plan 5, the answer is "more likely than under any previous plan". The Institute for Fiscal Studies' modelling suggests that 50-70% of Plan 5 borrowers will repay their loan in full before the 40-year write-off - compared to around 25% under Plan 2. The combination of the lower threshold and longer write-off term substantially increases lifetime repayment expectations.

This is why the threshold and write-off changes were forecast by the OBR to materially increase HMRC student-loan revenue without changing the headline rate.

Voluntary overpayments

You can make voluntary overpayments directly to SLC at any time (no penalty). Common reasons:

• Approaching write-off and want to clear the loan to stop interest accruing.
• A windfall (inheritance, bonus, sale of business) and want to clear the debt.
• Believe the loan is dragging your credit profile (it doesn't - student loans don't appear on credit files for credit-scoring purposes).

For most Plan 5 borrowers, voluntary overpayments are NOT financially optimal early in the loan's life - interest compounds slowly (RPI only, no surcharge) and a 40-year horizon means even substantial early overpayments don't produce material outcomes. Run the maths through MSE's student-loan calculator before making a voluntary payment of £1,000+.

Disclaimer

PayslipIQ provides automated educational guidance based on the figures you supply. It is not regulated financial advice. Student loan rules differ between the four UK nations and across plans, and may change in future Spending Reviews. For complex situations (career-break, overseas earnings, mixed plans), contact the Student Loans Company directly or your union's financial advice line.