Plan 1 vs Plan 2: Which Student Loan is Better?
Understanding the differences between Plan 1 and Plan 2 student loans is crucial for managing your debt effectively.
Quick Comparison
Plan 1
Threshold: £20,195
Rate: 1.5% (Fixed)
Plan 2
Threshold: £31,604
Rate: RPI + up to 3%
Key Differences
Payment Threshold
Plan 1 has a lower threshold of £20,195, meaning you start paying back when your income exceeds this amount. Plan 2 has a higher threshold of £31,604, so you don't pay until you earn more.
Higher threshold = Longer interest-free period and lower monthly payments for most graduates.
Interest Rates
Plan 1 charges a fixed 1.5% interest. Plan 2 interest is variable, tied to RPI (Retail Price Index) plus up to 3%, which can increase significantly.
Fixed rates are more predictable; variable rates can increase with inflation.
Repayment Period
Plan 1 loans are written off after 30 years. Plan 2 loans last 40 years, which means a longer repayment obligation.
Shorter period = Debt-free sooner, but potentially higher monthly payments.
Which Plan is Better for You?
Choose Plan 1 if you:
- • Earn less than £30,000
- • Prefer fixed interest rates
- • Want certainty in your repayments
- • Plan to earn more later in your career
Choose Plan 2 if you:
- • Currently earn £30,000-£50,000
- • Can afford the variable interest uncertainty
- • Benefit from the higher income threshold
- • Expect to earn significantly more in future
Calculate Your Repayment
The best way to compare is to run your numbers through both plans using our calculator.
Use Our Calculator