Plan 5 Student Loan Repayments

Plan 5 Student Loan Repayments

Plan 5 is a new student loan repayment plan for students starting courses from August 2023 onwards. It has a lower repayment threshold and a longer repayment period than existing plans.

Key Points:

• Operation: Collected in the same way as Plans 1, 2, and 4.

• First PAYE Repayments: Start from 6 April 2026.

• Repayment Rate: 9% of earnings above £25,000/year (before Class 1 NICs).

• Employer Notifications: SL1 notices will be sent in March 2026 for borrowers due to start repayments in April 2026.

• Plan Rules:

  • Only one plan type can be deducted at a time (Plan 1, 2, 4, or from April 2026, Plan 5).

  • Postgraduate loans (Plan 3) can be deducted at the same time as any student loan plan (including Plan 5).

• Default Plan: From 2026/27, Plan 5 will be the default plan type for new borrowers until a start notice confirms otherwise.

Key Details Table

FAQs: Plan 5 Student Loan Repayments

What should I do if the employee’s student loan plan is unknown?

From April 2026, if an employee’s student loan position is unknown, you should use Plan 5 as the default (instead of Plan 1).
Payroll systems should be updated before this date to ensure compliance with the new HMRC guidance.

Who does Plan 5 apply to?

Students who started a higher education course in England on or after 1 August 2023.

When do repayments begin?

From 6 April 2026, collected automatically through PAYE.

How much is repaid?

Employees repay 9% of earnings above £25,000 per year (before Class 1 NICs).

Where can I find more details?

See the CIPP guidance on Plan 5.

How do I know if an employee should be on Student Loan Plan 5?

Employees who started their higher education course in England on or after 1 August 2023 should be placed on Plan 5.
Those who began their courses before this date will remain on their original plan (Plan 1, Plan 2 or Plan 4), depending on where and when they studied.

Examples

Let’s look at a few examples to understand how this works in practice:

Case 1 – £27,300 per year

This employee earns just above the £25,000 threshold.
They repay 9% of the £2,300 that exceeds the threshold, resulting in a £17 monthly deduction from their salary.
Although small, these repayments gradually contribute to reducing the overall loan balance over time.

Case 2 – £24,000 per year

Since the employee earns below the repayment threshold, they don’t make any repayments.
Their take-home pay remains unaffected until their income rises above £25,000.

Case 3 – £105,480 per year

At this salary level, repayments increase significantly.

The employee earns £80,480 above the threshold, so they repay 9% of that amount, which equals roughly £603 per month. These higher repayments reflect the income-based design of the system — those who earn more repay more, while those below the threshold pay nothing.