For the 2026/27 UK tax year, two graduates both earn a salary of £30,000: one repays a Plan 2 student loan (repayment threshold £29,385 a year) and the other repays a Plan 5 student loan (repayment threshold £25,000 a year), and both plans charge a 9% repayment rate on income above their own threshold. Which statement correctly compares their annual student loan repayments?
- Both graduates repay the same amount, because the 9% repayment rate is applied to gross salary regardless of which plan's threshold applies
- The Plan 2 graduate repays more than the Plan 5 graduate, because Plan 2 is the older, stricter repayment structure
- Neither graduate has to repay anything this year, because £30,000 is below both plans' thresholds for graduates earning under £50,000
- The Plan 5 graduate repays substantially more than the Plan 2 graduate, because Plan 5's lower £25,000 threshold exposes far more of the same £30,000 salary to the 9% rate than Plan 2's higher £29,385 threshold does
Why D? And why not the others?
Correct answer: D. The Plan 5 graduate repays substantially more than the Plan 2 graduate, because Plan 5's lower £25,000 threshold exposes far more of the same £30,000 salary to the 9% rate than Plan 2's higher £29,385 threshold does
Student loan repayments are charged at 9% only on income above the borrower's own plan-specific threshold, not on gross salary as a whole, so the size of the repayment depends entirely on how much of the £30,000 salary sits above each threshold: the Plan 2 graduate has only £615 above their £29,385 threshold, producing a repayment of roughly £55 a year, while the Plan 5 graduate has £5,000 above their much lower £25,000 threshold, producing a repayment of £450 a year — far more than the Plan 2 graduate, matching the correct option. The option claiming both graduates repay the same amount ignores that the 9% rate applies only above each plan's threshold, not to the full salary. The option claiming Plan 2 produces a larger repayment gets the comparison backwards, since Plan 2's higher threshold shields more of the salary from the charge. The option claiming neither graduate repays anything is wrong because £30,000 exceeds both plans' thresholds, so both graduates have at least some income exposed to the 9% rate; there is no separate £50,000 threshold that exempts them.
Source: GOV.UK: Repaying your student loan — what you'll repay