Finance · 5 min read

What Is A Plan 1 Or Plan 2 Student Loan?


When it comes to financing higher education, you’re probably going to need a student loan. This is because - however great attending university is - it comes with a hefty price tag!

However, when it comes to student loans, it’s important to remember they’re not all the same.

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In fact, when it comes to these handy loans, there are a few different types people can borrow. But don’t sweat it, this is pretty easy to get your head around. And we’re here to break this down as simply as we can!

What's The Difference Between Plan 1 and 2 Student Loans?

Depending on when and where you took out your student loan, the plan you’re on will vary.

Plan 2 student loans are those taken out on or after September 2012 to July 2023 in England or Wales. You’ll be on Plan 2 if:

  • You’re studying an undergraduate course
  • You’re studying for a Postgraduate Certificate of Education (PGCE)
  • You take out an Advanced Learner Loan
  • You take out a Higher Education Short Course Loan

Do we have any recent grads in the house? If this is you, you’ll probably be on Plan 2!

Alternatively, anyone that withdrew a loan in England, Wales or Northern Ireland before September 2012 is on Plan 1.

Besides Plan 1 and 2 student loans, there are also Plans 4 and 5. Don’t worry, these are the last you need to remember!

Any undergraduate or postgraduate who borrowed a student loan in Scotland will be on Plan 4. Alternatively, anyone starting their course after August 2023 will be on Plan 5.

Phew, that was all pretty simple, right? If you are still worrying and want to double-check, the government or SLC website is just a couple of clicks away!

How Do Plan 1 Student Loans Work?

So, anyone that took out a student loan in England, Wales or Northern Ireland before September 2012 is on Plan 1.

But how exactly do Plan 1 loans work, and what makes them different to Plan 2?

Of course, the primary difference in plans is the year and country student loans were withdrawn.

But other main differences include the repayment thresholds, interest rates, and when these loans are written off.

As opposed to traditional loans, student loans are income-contingent. This means that they’re based on a borrower’s income. Once a borrower's salary goes above a certain figure, they need to start repaying their student loan. Urgh, it's a drag we know, but rules are rules!

For Plan 1 loans, the annual repayment threshold is £22,015. This means the monthly threshold is £1,834.

While repaying your loan every month may sound bad enough, there’s more! Once over the repayment threshold, you’ll also need to pay interest. Fun right - not!

For anyone on a Plan 1 student loan, the interest rate is 5.5%.

The final difference is when these loans get written off. Or, in other words, when you finally have freedom - at last!

For Plan 1 student loans, if you took out your loan before September 2006, it will be written off when you’re 65. For those who took one out after this point, your loan will be written off 25 years after the April you were first due to repay.

How Do Plan 2 Student Loans Work?

For people on a Plan 2 student loan, things work a little differently.

When it comes to the repayment thresholds on Plan 2 student loans, it's actually quite a lot higher than Plan 1. The yearly threshold on Plan 2 student loans is £27,295, meaning the monthly threshold is £2,274

And the interest rate on Plan 2 student loans are different as well. Unfortunately, it’s significantly higher than that on Plan 1 student loans. Sucks, right?

The interest rate on Plan 2 student loans are 7.1%. Yikes, sorry Plan 2 borrowers!

Last but not least is the write-off date. Plan 2 student loans are written off 30 years after the April you were first due to repay.


Student loans are never fun to discuss. However useful they are, thinking of them can just remind you of all the debt you’ve left to repay.

Nevertheless! It’s important to understand the ins and outs of these loans. And it's particularly important to know which student loan plan you’re on.

This will help to ensure you don’t make any slips ups when it comes to repaying your loan. And, believe us, fewer mistakes will make this whole process a lot less stressful!

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