How Student Loan Deductions Affect Your Payslip?
Student loan deductions explained for 2026/27. Learn how Plan 1, 2, 4, 5, and Postgraduate loans affect your payslip and take-home pay.
For many graduates, the first payslip from a new job contains a deduction that was not fully anticipated. Alongside income tax and National Insurance, a student loan repayment line appears and quietly reduces take-home pay each month. The amount can seem disconnected from what you actually borrowed, and the calculation is not always obvious from the payslip itself.
Student loan repayments in the UK are income-contingent, meaning you only repay when you earn above a set threshold, and the amount you repay is a fixed percentage of earnings above that threshold rather than a fixed monthly payment. The system is designed to make repayments affordable at different income levels, but it means the deduction changes as your salary changes and varies significantly between workers on the same salary depending on which loan plan they hold.
This guide explains how each plan works, what the 2026/27 thresholds are, how the deduction is calculated, what it looks like on a payslip, and how to check whether the right amount is being taken from your pay each month.
Student loan repayments are deducted automatically through PAYE alongside income tax and National Insurance. The amount depends on your loan plan and how much you earn above the plan threshold. For most undergraduate plans, you repay 9% of earnings above the threshold. Postgraduate loans charge 6% above a separate threshold. You pay nothing if your earnings fall below your plan's threshold, regardless of how large your outstanding balance is.
Key Takeaways:
- Student loan deductions are calculated per pay period and do not self-correct across the year
- Plan 1 threshold: £26,900 per year (9% above)
- Plan 2 threshold: £29,385 per year (9% above)
- Plan 4 threshold: £33,795 per year (9% above)
- Plan 5 threshold: £25,000 per year (9% above)
- Postgraduate loan threshold: £21,000 per year (6% above)
- Bonuses and overtime increase your student loan deduction in that month only
- You can have two loans active simultaneously (undergraduate + postgraduate)
How Student Loan Repayments Work Through PAYE
When you are employed, your employer deducts student loan repayments from your gross pay each pay period alongside income tax and National Insurance. This is handled through PAYE and is not optional for earnings above the threshold.
When you are employed, your employer deducts student loan repayments from your gross pay each pay period alongside income tax and National Insurance. This is handled through PAYE and is not optional for earnings above the threshold. Your employer receives a start notice from the Student Loans Company or HMRC instructing them which plan to use and when to begin deductions. The amount is calculated on your gross pay for each period, not on your annual income, and the deduction is final for that period with no year-end cumulative correction.
This non-cumulative nature is one of the most important things to understand about student loan deductions. If you have an unusually high-earning month due to a bonus or overtime, the deduction in that month is higher because it is calculated on the elevated gross pay. That higher deduction is not offset in quieter months. Over the year, your total repayments will reflect your total earnings, which is correct, but the timing of deductions follows each period independently rather than being smoothed across the year.
For self-employed workers, repayments are not collected through PAYE. Instead, they are calculated annually as part of the self assessment tax return and paid to HMRC alongside income tax and National Insurance. The same thresholds and rates apply, but the payment timing is different. Our self-employed tax calculator includes student loan repayments alongside income tax and Class 4 NI for self-employed calculations.
The Five UK Loan Plans Explained
There are five student loan plans in operation in the UK for 2026/27, each with its own repayment threshold and write-off timeline. Which plan you are on depends entirely on when and where you started your course.
There are five student loan plans in operation in the UK for 2026/27, each with its own repayment threshold and write-off timeline. Which plan you are on depends entirely on when and where you started your course. You cannot choose your plan.
Plan 1
Plan 1 applies to borrowers who started higher education in England or Wales before 1 September 2012, or in Northern Ireland at any point. The repayment threshold for 2026/27 is £26,900 per year. You repay 9% of gross earnings above this threshold. Plan 1 loans are written off 25 years after the April following the academic year you first became liable to repay, or when you turn 65, whichever comes first. Interest is capped at the lower of the Retail Price Index (RPI) or the Bank of England base rate plus 1%, making Plan 1 one of the lower-interest options.
Plan 2
Plan 2 applies to borrowers who started higher education in England or Wales between 1 September 2012 and July 2023. The threshold for 2026/27 is £29,385 per year, up from £28,470 in 2025/26. You repay 9% of gross earnings above the threshold. Plan 2 loans are written off after 30 years. Interest is RPI plus up to 3%, with the full 3% add-on applying while you are studying and for earnings above approximately £49,130, tapering between the threshold and that level. This makes Plan 2 the highest-interest undergraduate option for most borrowers.
Plan 4
Plan 4 applies to Scottish students who received loans through the Student Awards Agency Scotland (SAAS). The threshold for 2026/27 is £33,795 per year, the highest threshold of any plan. You repay 9% of gross earnings above this threshold. Plan 4 loans are written off after 30 years. Interest is capped at the lower of RPI or the Bank of England base rate plus 1%, the same low-interest structure as Plan 1. The high threshold means many Scottish graduates on average salaries repay little or nothing in the early years of their career.
Plan 5
Plan 5 applies to students who started a higher education course in England from August 2023 onwards. The threshold for 2026/27 is £25,000 per year, the lowest threshold of any plan. Repayments begin earlier in the career as a result. You repay 9% of gross earnings above £25,000. The write-off period for Plan 5 is 40 years, the longest of any plan. Interest is capped at RPI with no additional percentage, making it more favourable on interest than Plan 2. Mandatory PAYE deductions for Plan 5 borrowers began in April 2026 as the first cohort of Plan 5 borrowers entered the workforce.
Postgraduate Loan
Postgraduate loans are a separate product from undergraduate loans and carry their own threshold and repayment rate. The threshold for 2026/27 is £21,000 per year. You repay 6% of gross earnings above this threshold, not 9%. Postgraduate loans are written off after 30 years. Interest is RPI plus 3%, regardless of income level. Crucially, if you hold both an undergraduate and a postgraduate loan, both are active simultaneously and deductions for each are calculated independently. A borrower with a Plan 2 undergraduate loan and a postgraduate loan earning £35,000 would repay both 9% above £29,385 and 6% above £21,000 in the same month.
2026/27 Thresholds at a Glance
The table below shows the annual, monthly, and weekly thresholds for all five plans, plus the repayment rate and write-off period.
| Plan | Annual Threshold | Monthly Threshold | Weekly Threshold | Rate | Write-Off |
|---|---|---|---|---|---|
| Plan 1 | £26,900 | £2,241.67 | £517.31 | 9% | 25 years |
| Plan 2 | £29,385 | £2,448.75 | £565.29 | 9% | 30 years |
| Plan 4 | £33,795 | £2,816.25 | £649.90 | 9% | 30 years |
| Plan 5 | £25,000 | £2,083.33 | £480.77 | 9% | 40 years |
| Postgraduate | £21,000 | £1,750 | £403.85 | 6% | 30 years |
How to Calculate Your Monthly Repayment
The formula is the same for all plans. Take your gross annual salary, subtract the annual threshold for your plan, multiply the result by the repayment rate, and divide by 12 to get the monthly figure.
The formula is the same for all plans. Take your gross annual salary, subtract the annual threshold for your plan, multiply the result by the repayment rate, and divide by 12 to get the monthly figure. For weekly-paid workers, divide the weekly threshold from the table above, calculate the weekly deduction, and multiply by the number of weeks in the pay period.
Here is the calculation for a £35,000 salary across all five plans:
| Plan | Annual Earnings Above Threshold | Annual Repayment | Monthly Repayment |
|---|---|---|---|
| Plan 1 | £35,000 - £26,900 = £8,100 | £729 | £60.75 |
| Plan 2 | £35,000 - £29,385 = £5,615 | £505.35 | £42.11 |
| Plan 4 | £35,000 - £33,795 = £1,205 | £108.45 | £9.04 |
| Plan 5 | £35,000 - £25,000 = £10,000 | £900 | £75 |
| Postgraduate | £35,000 - £21,000 = £14,000 | £840 | £70 |
| Plan 2 + Postgraduate | Both active simultaneously | £505.35 + £840 = £1,345.35 | £112.11 |
Two colleagues on £35,000 where one is on Plan 5 and the other has no student loan differ by £75 per month in take-home pay, every month, for as long as the Plan 5 balance remains outstanding. Use our student loan repayment calculator to get the exact monthly figure for your plan and salary.
What the Deduction Looks Like on Your Payslip
On a standard PAYE payslip, student loan repayments appear as a separate deduction line, usually labelled Student Loan or SL.
On a standard PAYE payslip, student loan repayments appear as a separate deduction line, usually labelled Student Loan or SL. It sits alongside income tax and National Insurance in the deductions section. There is no separate column for interest; the payslip line shows only the repayment amount deducted that month. The outstanding balance and accrued interest are visible through your Student Loans Company online account, not on your payslip.
Your payslip will not typically show which plan is being applied, just the deduction amount. If you want to verify which plan your employer is using, check your HMRC personal tax account or contact the Student Loans Company directly. The plan used should match the one the Student Loans Company has on record for your loan type.
A Realistic Payslip Example
The table below shows an illustrative payslip for an employee earning £32,000 per year on a standard 1257L tax code with a Plan 2 student loan and a 5% salary sacrifice pension.
| Payslip Item | Monthly Amount |
|---|---|
| Gross Pay | £2,666.67 |
| Pension (5% salary sacrifice) | -£133.33 |
| Taxable Pay | £2,533.33 |
| Income Tax (1257L) | -£297.17 |
| National Insurance (8%) | -£118.93 |
| Student Loan (Plan 2, 9%) | -£19.79 |
| Net Pay | £2,097.11 |
The student loan deduction of £19.79 in this case is relatively modest because at £32,000 per year the earnings are not far above the Plan 2 threshold of £29,385. The deduction grows as salary increases and would cease if the borrower's monthly earnings dropped below the monthly threshold of £2,448.75.
How Student Loan Deductions Change With Salary
Because repayments are a percentage of earnings above the threshold, the deduction scales with salary. The table below shows monthly Plan 2 repayments at different salary levels.
| Annual Salary | Monthly Gross | Plan 2 Monthly Repayment | As % of Gross |
|---|---|---|---|
| £29,000 | £2,416.67 | £0 | 0% |
| £32,000 | £2,666.67 | £19.79 | 0.74% |
| £35,000 | £2,916.67 | £42.11 | 1.44% |
| £45,000 | £3,750 | £116.36 | 3.10% |
| £55,000 | £4,583.33 | £190.61 | 4.16% |
| £70,000 | £5,833.33 | £303.49 | 5.20% |
The percentage of gross pay going to student loan repayments rises with salary, but because the repayment is capped at 9% of the amount above the threshold rather than 9% of total earnings, it never feels as significant as income tax in percentage terms. At £55,000, a Plan 2 borrower repays just over £190 per month, which is meaningful but proportionally smaller than their income tax deduction of around £625 per month.
When Do Deductions Start and Stop?
Repayments begin in the April following graduation and stop when the balance is cleared, the write-off date is reached, or earnings fall below the threshold.
When They Start
Repayments through PAYE begin in the April following the academic year in which you graduated or left your course. The Student Loans Company notifies HMRC, which instructs your employer to begin deductions via a start notice. If you start a new job, your new employer will also receive a start notice if deductions were already in place. It is important to provide your P45 or complete the starter checklist accurately when starting a new role to avoid delays in setting up the correct deductions.
Plan 5 borrowers are a special case for 2026/27: mandatory payroll deductions for Plan 5 began in April 2026 for the first cohort who graduated in summer 2025. Employers received start notices ahead of this date.
When They Stop
Student loan deductions stop automatically when:
- Your outstanding balance reaches zero. The Student Loans Company notifies HMRC, which issues a stop notice to your employer. Deductions cease from the following pay period.
- You reach the write-off date for your plan (25 years for Plan 1, 30 years for Plans 2, 4, and Postgraduate, 40 years for Plan 5). Any remaining balance is cancelled and no further deductions are taken.
- Your gross earnings in a pay period fall below the monthly or weekly threshold. No deduction is taken in that period, though deductions resume if earnings exceed the threshold again.
If your loan is close to being paid off, it is worth monitoring your Student Loans Company account to watch the balance approach zero. Occasionally, there is a slight over-deduction in the final month if the stop notice is processed after one extra payment is taken. This is refundable; contact the Student Loans Company if you believe you have been over-deducted in the final month.
Bonuses, Overtime, and the Student Loan Spike
Student loan repayments are calculated on each pay period's gross earnings independently. A bonus or overtime increases your deduction for that month.
Student loan repayments are calculated on each pay period's gross earnings independently. When a bonus or significant overtime payment increases your gross pay in a particular month, your student loan deduction for that month increases proportionally. Unlike income tax, which self-corrects cumulatively through PAYE across the year, the student loan deduction in the bonus month is final.
For a Plan 2 borrower earning £36,000 per year who receives a £4,000 bonus in November, their gross pay for that month is £7,000. The monthly Plan 2 threshold is £2,448.75. The student loan deduction in November is 9% of (£7,000 minus £2,448.75) = 9% of £4,551.25 = £409.61. In a normal month their deduction would be around £45. The additional £365 in student loan repayment that month is not recovered in December; it simply reduces the outstanding balance faster.
For borrowers who are unlikely to repay their full balance before write-off, large repayments from bonus months represent money that would otherwise have been written off. For those close to clearing the balance, the accelerated repayment can actually bring forward the date the loan is paid off. Our bonus tax explained guide covers all the deductions that spike in a bonus month.
Holding Two Loans at Once
It is possible to hold both an undergraduate and a postgraduate loan simultaneously. Both are active and both are deducted each month when earnings exceed the respective thresholds.
It is possible to hold both an undergraduate and a postgraduate loan simultaneously. If you do, both are active and both are deducted each month when earnings exceed the respective thresholds. The calculations are independent: your undergraduate plan threshold is applied to your gross earnings to calculate the 9% repayment, and the postgraduate threshold of £21,000 is applied separately to calculate the 6% repayment. The two amounts are then added together on your payslip, sometimes as a single combined student loan line or sometimes as two separate lines depending on the employer's payroll software.
Combined Loan Example
Alex earns £40,000 per year and has both a Plan 2 undergraduate loan and a postgraduate loan.
| Loan | Monthly Earnings Above Threshold | Rate | Monthly Deduction |
|---|---|---|---|
| Plan 2 (threshold £2,448.75/month) | £3,333.33 - £2,448.75 = £884.58 | 9% | £79.61 |
| Postgraduate (threshold £1,750/month) | £3,333.33 - £1,750 = £1,583.33 | 6% | £95 |
| Total student loan deduction | £174.61 |
Alex repays £174.61 per month across both loans on a £40,000 salary. This is in addition to income tax of around £457 and NI of approximately £183 per month. The combined effect of all deductions on the same salary without student loans would be around £2,360 take-home; with both loans active it falls to approximately £2,186.
Common Student Loan Payslip Mistakes
Several common mistakes can affect your student loan deductions, including the wrong plan being applied and deductions continuing after the loan is cleared.
Wrong Plan Applied by the Employer
Employers apply the plan indicated on the start notice from HMRC, which reflects the plan registered by the Student Loans Company. If the wrong plan is on file, the wrong threshold will be used and your deductions will be incorrect. Plan 1 has a lower threshold than Plan 2, so a Plan 2 borrower on Plan 1 rules would have deductions begin earlier and be higher than they should be. If your payslip shows a student loan deduction but you believe you should not be making one yet, or the amount looks inconsistent with your plan, contact the Student Loans Company to confirm which plan they have on record.
Deductions Continuing After Loan Is Cleared
Occasionally PAYE deductions continue briefly after a loan is fully repaid because there is a processing lag between the Student Loans Company and HMRC. If your balance has reached zero but deductions continue on your payslip, contact the Student Loans Company. Any over-deduction in the final period is refundable.
Not Realising a Postgraduate Loan Is Separate
Some borrowers with both loan types assume their single monthly repayment covers both. In reality, each is calculated independently and combined on the payslip. If you hold a postgraduate loan alongside an undergraduate plan, check your payslip or Student Loans Company account to confirm both are being processed.
Assuming Deductions Are Based on Interest or Balance
Student loan repayments through PAYE are based purely on earnings above the threshold, not on the size of your balance or the interest accruing. A borrower with £50,000 outstanding and another with £5,000 outstanding pay exactly the same monthly amount if they earn the same salary on the same plan. The balance affects how quickly the loan is cleared, not how much you repay each month.
Expecting a Year-End Correction
Income tax self-corrects through PAYE's cumulative system across the tax year. Student loan deductions do not. If you are over-deducted in a bonus month, those deductions reduce your balance faster and are not returned in subsequent months. If your employer applies the wrong plan and over-deducts, you must contact the Student Loans Company directly to request a refund; it will not self-correct through payroll.
How to Check Your Student Loan Deductions Are Correct
Follow these steps to verify your student loan deductions are correct and identify any issues.
- Confirm which plan you are on. Log into your Student Loans Company account or contact the SLC on 0300 100 0611. The plan on record determines the threshold and rate applied.
- Check the threshold for your plan. Use the 2026/27 thresholds in the table above or confirm at gov.uk. If your monthly gross pay is below the monthly threshold for your plan, no deduction should appear on your payslip.
- Calculate your expected deduction manually. Subtract the monthly threshold from your gross monthly pay and multiply by 9% (or 6% for a postgraduate loan). Compare the result with the deduction on your payslip.
- Use the TaxCalculate student loan calculator. Our student loan repayment calculator handles all five plan types and shows the monthly deduction for any salary.
- Check whether both loans are active if applicable. If you have a postgraduate loan in addition to an undergraduate plan, verify that both are showing on your payslip or confirm with the SLC that both are registered correctly.
- Speak to payroll if a discrepancy remains. If the plan applied does not match your records, your payroll department can check the start notice received from HMRC. If the notice itself is wrong, the correction must be made through the Student Loans Company rather than by the employer directly.
Final Thoughts
Student loan deductions are a straightforward part of the PAYE system once you understand which plan you are on and how the threshold calculation works.
Student loan deductions are a straightforward part of the PAYE system once you understand which plan you are on and how the threshold calculation works. The deductions scale with earnings, stop when your balance reaches zero or your write-off date arrives, and change in high-earning months because they are calculated per pay period without a cumulative year-end correction.
The most practical habit is to know your plan, check the threshold, and verify the deduction matches the expected amount for your gross monthly pay. The most common issues — wrong plan applied and deductions continuing after repayment — are both resolvable through the Student Loans Company directly rather than through payroll.
Our student loan repayment calculator covers all five plan types and shows the exact monthly deduction for any salary. If you want to see the full combined picture of income tax, NI, and student loan for your salary, our income tax calculator brings all three deductions together in one view. And for more on how student loan deductions sit alongside your other payslip lines, our PAYE payslip guide explains every deduction line from gross pay to net.
Official Sources and Further Reading
Authoritative guidance on student loan deductions from official government sources.
GOV.UK Official Guidance:
- Repaying your student loan - Official guidance on all plans
- Student loan repayments - Thresholds and rates
- Student Loans Company contact - 0300 100 0611
This guide provides general information about student loan deductions for 2026/27. Individual circumstances vary. For personalised advice about your specific situation, consult a qualified tax adviser or contact the Student Loans Company directly. Always check GOV.UK for current rates and guidance.
Written by
Daniel Reed
Daniel Reed writes about PAYE, payslips, tax codes, workplace deductions and take-home pay in the UK.
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