Key takeaways
- Employers deduct 9% of earnings above the plan threshold for undergraduate loans and 6% above £21,000 for postgraduate loans.
- 2026/27 thresholds: Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000.
- Deductions are worked out on each pay period, not annually, so a bonus month can trigger a repayment even if annual pay is below the threshold.
- Employers start deductions when told by HMRC (an SL1 notice) or by the employee's P45 or starter checklist, and stop on an SL2 notice.
- Overpayments are refunded by the Student Loans Company, not by the employer.
Most graduates repay their student loans through payroll, alongside tax and National Insurance. The amount depends on which plan the loan is on and how much is earned in each pay period. Employers deduct it; the Student Loans Company keeps the balance.
Repayment thresholds for 2026/27
| Loan | Who has it | Annual threshold | Monthly | Weekly | Rate |
|---|---|---|---|---|---|
| Plan 1 | Courses started in England or Wales before 1 September 2012, and all Northern Ireland loans | £26,900 | £2,241.66 | £517.30 | 9% |
| Plan 2 | Courses started in England or Wales between 1 September 2012 and 31 July 2023 | £29,385 | £2,448.75 | £565.09 | 9% |
| Plan 4 | Scottish loans | £33,795 | £2,816.25 | £649.90 | 9% |
| Plan 5 | Courses started in England on or after 1 August 2023 | £25,000 | £2,083.33 | £480.76 | 9% |
| Postgraduate loan | Master’s and doctoral loans in England and Wales | £21,000 | £1,750 | £403.84 | 6% |
How the deduction is calculated
For each pay period, the employer deducts the plan rate on earnings above the threshold for that period. Earnings for student loan purposes are broadly the same as for Class 1 National Insurance: gross pay including overtime, bonuses and statutory payments, but not benefits in kind.
Example
An employee on Plan 2 earns £3,000 in a month in 2026/27:
- monthly threshold: £2,448.75
- earnings above the threshold: £551.25
- deduction: 9% × £551.25 = £49.61 (rounded down to whole pounds on many payrolls, so £49)
If the same employee also has a postgraduate loan, the employer deducts an extra 6% of earnings above £1,750 a month: 6% × £1,250 = £75.
Pay periods, not annual pay
Because the calculation is non-cumulative, an employee whose annual pay is below the threshold can still have a deduction in a month when overtime or a bonus lifts pay above the monthly threshold. They can ask the Student Loans Company for a refund after the end of the tax year if their total income for the year was below the annual threshold.
More than one plan
- If someone has both a Plan 1 and a Plan 2 loan, the employer deducts 9% above the lower (Plan 1) threshold, and the Student Loans Company allocates the payments between the loans.
- Postgraduate loans are repaid alongside any undergraduate loan, with both deductions made at the same time.
When employers start and stop deductions
| Trigger | What the employer does |
|---|---|
| HMRC sends a start notice (SL1 or PGL1) | Start deductions from the next available payday, using the plan stated |
| The employee’s P45 shows a student loan deduction | Start deductions; ask the employee which plan they are on if unclear |
| The employee’s starter checklist says they have a loan | Start deductions on the plan type indicated |
| HMRC sends a stop notice (SL2 or PGL2) | Stop deductions from the next payday |
Employers must not stop deductions just because an employee says the loan is repaid. Only an HMRC stop notice ends them. Deductions are reported on the Full Payment Submission and paid to HMRC with PAYE.
Self-employed and other income
Self-employed people, and anyone with significant untaxed income, repay through Self Assessment: 9% (or 6% for postgraduate loans) of total income above the threshold is added to the tax bill. Payments made through payroll are credited against the annual amount. Unearned income such as rent or dividends only counts if it is over £2,000 a year.
Overpayments and refunds
- If too much is deducted in a tax year, for example because annual income was below the threshold, the borrower can ask the Student Loans Company for a refund.
- If the loan has been paid off but deductions continued, the SLC refunds the excess. Borrowers close to clearing their loan can switch to Direct Debit for the final payments to avoid overpaying.
- Employers do not refund student loan deductions, except to correct their own payroll errors in the current tax year.
Write-off
Unpaid balances are written off after a set period, which depends on the plan: for example 30 years after the April when repayments were first due for Plan 2, and 40 years for Plan 5. The write-off is not taxable.
Frequently asked questions
What are the student loan thresholds for 2026/27?
Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000 and Postgraduate loan £21,000.
How much is taken for student loan repayments?
9% of earnings above the plan threshold for undergraduate loans, and 6% above £21,000 for postgraduate loans, worked out each pay period.
Why was student loan taken from my pay when I earn under the threshold?
Deductions are calculated per pay period, so a month with overtime or a bonus can go over the monthly threshold. You can ask the Student Loans Company for a refund if your income for the year was below the annual threshold.
Can my employer stop deductions if I have paid off my loan?
Only when HMRC sends a stop notice. If you overpay, the Student Loans Company refunds you.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.