Plan Comparison

Plan 2 vs Plan 5: Which is Cheaper? Income Decides Everything

The post-2023 Plan 5 seems to have lower rates, but the 40-year term could cost low-to-middle earners tens of thousands more. Data shows you which to choose.

12 min read Actuarial Team Updated Jan 2026

Plan 5 launched in 2023 with lower interest (RPI only) but extended repayment to 40 years. This seemingly small change could create a £30,000+ lifetime cost difference. The key is your lifetime earnings trajectory.

Core Differences

Feature	Plan 2	Plan 5	Impact
Repayment Threshold	£27,295/year	£25,000/year	Plan 5 lower, more people pay
Interest Rate	RPI + up to 3%	RPI only	Plan 5 is 2-3% lower
Write-Off Period	30 years	40 years	Plan 5 adds 10 years
Monthly Rate	9%	9%	Same

Three Income Scenarios

Using a typical £45,000 loan balance, we model different career paths:

Scenario A: Low Growth (Civil Servant/Teacher)

Starting salary £28,000, 2% annual growth, Loan £25,000

Plan 2 outcome:

• Total repaid: £23,114

• Written off: £51,968

• Effective rate: near-zero

Close-up of UK payslip showing student loan deduction

Plan 5 outcome:

• Total repaid: £48,000

• Written off: £32,000

• Effective rate: near-zero but higher than plan2

Scenario B: Medium Growth (Engineer/Nurse)

Starting salary £35,000, 3% annual growth, Loan £25,000

Plan 2 outcome:

• Total repaid: £58,965

• Cleared in: 28 years

• Interest paid: £33,965

Plan 5 outcome:

• Total repaid: £35,771

• Cleared in: 19 years

• Interest paid: £10,771

Scenario C: High Growth (Finance/Lawyer)

Starting salary £50,000, 5% annual growth, Loan £50,000

Plan 2 outcome:

• Total repaid: £108,154

• Cleared in: 22 years

• Interest paid: £58,154

Plan 5 outcome:

• Total repaid: £67,404

• Cleared in: 16 years

• Interest paid: £17,404

Key Insight

Plan 5's lower rate seems attractive, but the 40-year term means low-middle earners may pay £15,000-25,000 more before write-off. This is essentially a stealth government revenue increase.

Plan Comparison FAQ

Can I choose between Plan 2 and Plan 5?

No. Plan assignment is statutory based on start date and location. You cannot choose—this is one of the UK higher education system's biggest pain points.

Can Plan 5's rate advantage offset 10 extra years?

For low-middle earners, no. The 10 extra years means more payments, especially later in your career when income is higher.

If I expect big income growth, is Plan 5 better?

Even with income growth, Plan 5's 40-year term could still cost more. Only if you consistently earn over £70,000 with rapid growth does the gap narrow.

Do postgraduate loans also have 40-year terms?

Postgraduate loans currently remain 30-year write-offs, independent of undergraduate loans. This makes them relatively more attractive.

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