Student loans: is it really a debt?
A number arrives that looks like the worst news of your life. Forty seven thousand pounds, at eighteen, before you have earned anything. Everyone around you treats it as a debt, because it is called a debt and it has a balance and it charges interest. But watch what it actually does, and it does not behave like any debt you will ever meet again. Whether that makes it better or worse is the question this page leaves with you.
What you repay is fixed by your salary, not by the size of the balance. Two people on the same wage pay exactly the same each month whether they owe twenty thousand or sixty. It stops when you drop below the threshold, and whatever is left is wiped after 30 or 40 years. That is how a tax works, not how a loan works.
The test that settles it
Here is the whole argument in one picture. Two people leave university. One borrowed a little. One borrowed a lot. They both get a job paying £30,000.
Try that with a credit card. Owe three times as much and you pay three times as much, or you are in trouble. Try it with a mortgage. Same thing. The size of the debt is the whole point of a debt.
Here it is not even part of the calculation. Nobody at any point asks what your balance is. Your employer takes 9% of everything above the threshold, sends it on, and that is the entire mechanism. Lose your job and it stops. Take a year out and it stops. Drop below £25,000 and it stops, with no arrears, no default, no letters.
Then it is deleted
Plan 5, which is most people who started in England from 2023, is written off 40 years after repayments were due to start. Plan 2 and postgraduate loans are written off after 30 years. Whatever is left on that day goes, however large.
And large is normal. The government's own forecast is that about 55% of Plan 5 borrowers starting in 2025/26 will repay in full. On the older Plan 2 terms it was 32%. So on the current plan, roughly four in ten people will never clear the balance, and on the plan before it, two in three never would.
Which means, for a large share of graduates, the number on the statement is not a bill. It is a ceiling they will never reach.
The interest is real and it is applied even when you are repaying nothing. Plan 5 charges RPI, currently 3.2%. On the average graduating balance of £47,900 that is about £1,533 of interest a year.
Now put it next to the repayment. On a £30,000 salary you repay £450 a year. So the balance goes up by about £1,083 that year, while you are paying every month, on time, exactly as required.
Run the sum backwards and you find the point where it stops growing. On those numbers you would need to earn about £42,000 before your repayment even matches the interest. Below that, the number on the statement climbs no matter what you do.
That is the moment most people decide the system is broken and something must be done about it. And here is the strange part: for the four in ten who never clear it, a growing balance costs them nothing at all, because they were never going to reach the end of it. The number frightens people into treating it like a credit card. It is not one.
Unless you are in the group who will clear it. Then every pound of that interest is a pound of your money. Same product, two completely different experiences, and which one you are in depends on a salary you cannot yet know.
What it does and does not do to the rest of your life
It is not on your credit file. No lender sees the balance. It does not lower a credit score, and it will not get you refused for a card.
But it does reach a mortgage, sideways. Affordability checks look at what actually lands in your account, and the repayment has already come out. On £40,000 that is £112.50 a month gone before the lender counts anything. So it does not appear as a debt and it does still shrink what you can borrow.
It stops when your income stops. No demands, no collectors, no mark against your name. That protection is real and it is the single largest practical difference between this and every other thing called a debt.
What this does and does not prove
It does not prove the system is fair, and it does not prove it is a swindle. It proves the label is wrong. Something you repay as a percentage of income, that stops when your income does, that ignores the size of the balance and is deleted after four decades, is behaving as a graduate tax with a balance printed on it.
What it leaves open is the question worth carrying: if it works like a tax, why is it presented as a debt? A tax invites an argument about whether the rate is right. A debt invites shame, and a quiet belief that you did this to yourself. Those two framings produce very different eighteen year olds, and only one of them asks questions.
Also left open, and worth saying plainly: the total outstanding across the country reached £295 billion by March 2026. Whatever is not repaid is carried by the public. That is a real cost to somebody, and anyone telling you this is free money is not being straight with you either.
- Which plan you are on. It decides everything. Plan 1 £26,900, Plan 2 £29,385, Plan 4 in Scotland £33,795, Plan 5 £25,000, all at 9%. Postgraduate is separate at £21,000 and 6%, and you can be repaying two at once.
- The date yours gets written off. 30 years for Plan 2, 40 for Plan 5, counted from the April after you finished. Put that year in writing somewhere.
- Whether you are forecast to clear it. Not a guess: run your realistic salary against the threshold and the interest rate. If your repayment is smaller than your interest, you are in the group for whom the balance is theatre.
- What the repayment does to your take-home pay. That is the number a mortgage lender will care about, years before the balance ever matters.
- What happens if you go abroad. The rules and thresholds change by country and you have to tell them. People who forget get into real trouble, and this is the one part of the system that really bites.
- Whether overpaying is money back or money gone. Overpaying only ever helps somebody who would have cleared the balance anyway. For everybody else it is a gift. Work out which one you are before anybody persuades you either way.
This site does not tell you what to do about your loan. It tells you what your loan actually is, which is the part nobody explained at eighteen.
- Thresholds and rates. GOV.UK student loans, terms and conditions 2026 to 2027: Plan 1 £26,900, Plan 2 £29,385, Plan 5 £25,000 at 9%, postgraduate £21,000 at 6%. Plan 4 £33,795 from GOV.UK repaying your student loan.
- Interest rates. Same GOV.UK page: Plan 1, Plan 4 and Plan 5 at 3.2%; postgraduate at 6.2%; Plan 2 on a sliding scale by income. Interest is applied even when your income is below the threshold.
- Write-off periods. House of Commons Library, student loan interest and repayment: 30 years for Plans 1, 2 and postgraduate, 40 years for Plan 5.
- Who repays in full. House of Commons Library, student loan statistics: about 55% of Plan 5 full-time undergraduates starting 2025/26 forecast to repay in full, against 32% forecast for the 2022/23 Plan 2 cohort.
- The average balance and the national total. Same briefing: average debt of £47,900 for those who finished in 2023 and became liable to repay in April 2026; £295 billion outstanding at the end of March 2026.
- Our arithmetic. Repayment on £30,000, Plan 5: (30,000 − 25,000) × 9% = £450 a year, £37.50 a month, whatever the balance. Interest on £47,900 at 3.2% = £1,532.80 a year. The two are equal at a salary of 25,000 + (1,532.80 ÷ 0.09) = about £42,030. Reproduce any of it on a calculator.
Questions people ask
Is a student loan really a debt?
It is called one and it has a balance and interest, but it behaves like a tax. Repayment is 9% of income above a threshold and takes no account of the size of the balance, it stops entirely if your income falls below the threshold, and whatever remains is written off after 30 or 40 years. About four in ten Plan 5 borrowers are forecast never to clear it.
Does a student loan affect your credit score?
No. It does not appear on your credit file and no lender sees the balance. It does reach a mortgage indirectly, because affordability checks look at your take-home pay and the repayment has already been deducted. On £40,000 that is £112.50 a month less for a lender to count.
Why is my student loan balance going up when I am paying it?
Because interest is charged on the whole balance while your repayment is only 9% of income above the threshold. On the average balance of £47,900 at 3.2%, interest is about £1,533 a year, while a £30,000 salary repays £450. You would need to earn about £42,000 before the repayment even matches the interest.
Should I pay off my student loan early?
This site does not advise anybody on what to do with their money. The fact that decides it is whether you would ever have cleared the balance before write-off. If you would, overpaying saves you interest. If you would not, overpaying hands over money that was going to be written off anyway. Work out which group your realistic salary puts you in before deciding.
When is a student loan written off?
Plan 5 is written off 40 years after the April you became due to repay. Plan 2 and postgraduate loans are written off after 30 years. Plan 1 depends on when you took it out. The remaining balance is cancelled on that date whatever its size.
What happens if I never earn enough to repay?
You repay nothing. There is no default, no arrears, no debt collector and no mark on your credit file. Interest still accrues on the balance, but if you never cross the threshold you never pay, and the balance is cancelled at the end of the term.
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Last checked 26 August 2026.