Plan 2 vs Plan 5: What Is Different and Why It Matters

If you are starting university in England in 2023 or later, you are on Plan 5 — a significantly different set of loan terms to the Plan 2 that applied to students from 2012 to 2023. Here is a detailed comparison.

Side-by-Side Comparison

The Threshold Difference

The Plan 5 threshold (£25,000) is lower than Plan 2 (£28,470). This means Plan 5 graduates start repaying at a lower salary. Someone earning £26,000 would pay nothing on Plan 2 but would repay £90 per year on Plan 5.

The Write-Off Difference

This is the most significant change. Plan 2 loans are written off after 30 years; Plan 5 loans after 40 years. The government's own analysis at the time of introduction estimated that a much higher proportion of Plan 5 graduates would repay their full loan — including accumulated interest — compared to Plan 2 graduates.

The 40-year window effectively means Plan 5 functions less like a graduate tax and more like a loan that higher earners will genuinely repay in full.

The Interest Rate Difference

Counterintuitively, Plan 5 has a simpler and potentially lower interest rate: RPI only, with no income surcharge. Plan 2 adds up to 3% above RPI for higher earners. In absolute terms, a Plan 2 high earner on RPI + 3% will see their balance grow faster than a Plan 5 graduate on RPI alone.

However, because the Plan 5 write-off is 40 years away rather than 30, interest has longer to compound. For many graduates, the net effect of lower interest but a longer window results in a higher overall total repayment.

Who Does Better Under Each Plan?

There is no clean answer. High earners who will repay in full may find the lower interest rate of Plan 5 slightly beneficial. Average earners who will reach write-off are likely to repay more under Plan 5 due to the lower threshold and longer write-off.

The Institute for Fiscal Studies published detailed analysis at the time of Plan 5's introduction. Their central estimate was that the average Plan 5 graduate would repay significantly more in total than the average Plan 2 graduate, despite the simpler interest structure.

Use the Calculator

The clearest way to understand the difference for your specific salary is to use our Plan 2 and Plan 5 calculators side by side, entering the same income assumptions. The Plan 5 calculator also has a built-in Plan 2 comparison toggle.