If you’ve got a student loan in the US, knowing your repayment threshold is key to managing your budget. For 2026, the thresholds for Plans 1, 2, 4, and 5 set the income levels where repayments kick in. Understanding these numbers helps you plan your finances better and avoid surprises.

Key Repayment Thresholds by Plan

Each student loan repayment plan has a distinct annual income level before you need to start repaying 9% of your earnings above that threshold. These thresholds act as a safety net so you don’t have to repay if you’re earning less. Here’s what you need to know for 2026:

  • Plan 1 (pre-2012 loans): You repay 9% on income over $24,990 per year. This plan generally applies to loans taken out before 2012.
  • Plan 2 (post-2012 England and Wales): Repay 9% on income above $27,295 annually. These loans are for students from 2012 onwards in England and Wales.
  • Plan 4 (Scotland): The threshold is higher here, with repayments starting at incomes above $31,395 per year.
  • Plan 5 (from 2023): For the newest loans, repayments begin at $25,000 per year.

Also, if you have a postgraduate loan, there’s a separate repayment rule. You pay 6% on income above $21,000 annually, which stacks on top of your primary plan repayments.

Comparing these thresholds to previous years, we see slight increases aligning with inflation adjustments. For example, Plan 1’s threshold rose from $24,500 in 2025 to $24,990 in 2026, a 2% increase. Plan 2’s threshold grew by about 1.8% from $26,800.

These thresholds are reviewed annually to keep pace with inflation and average earnings growth, so expect minor adjustments each year.

How Repayment Works

The repayment system kicks in only once your income crosses your plan’s threshold. Say you’re on Plan 2 and earn $30,000 a year. The repayment applies to the portion above $27,295 — that’s $2,705. You pay 9% of that, which comes to $243.45 annually, or roughly $20.30 per month.

Repayments are generally taken through your employer’s payroll system if you’re employed. Your employer deducts the amount automatically, sending it to the loan servicer. Self-employed borrowers handle repayments via quarterly tax filings.

If your income falls below the threshold during the year, repayments pause immediately. There’s no need to catch up later or pay back missed amounts once your earnings dip.

For borrowers with multiple loans, repayments are combined based on the highest applicable threshold. For example, if you have Plan 2 and a postgraduate loan, you’ll repay 9% above $27,295 and 6% above $21,000 respectively.

Voluntary Overpayments

Right now, you’re not limited to the minimum repayment amount. If you want to clear your loan faster, you can make voluntary overpayments anytime. These extra payments go directly towards reducing your outstanding balance.

Making overpayments helps cut down the total interest you’ll pay over the life of your loan. Interest accrues daily, so the sooner you pay off the principal, the less interest accumulates.

Thing is, there’s no penalty or fee for paying more than your scheduled amount. But keep in mind, overpayments can’t be refunded once made.

Some borrowers choose to make lump sum payments after bonuses or tax refunds, while others increase monthly deductions. Planning these can save thousands over years.

Loan Write-Off Dates

Every plan has a set period after which any remaining loan balance is written off, meaning you won’t owe anything further. Here’s the schedule:

  • Plan 1: Any unpaid balance is wiped clean after 25 years from the April you were first due to repay.
  • Plan 2: Loans are written off after 30 years.
  • Plan 4: Also after 30 years.
  • Plan 5: Written off after 25 years.

For example, if you started repaying a Plan 1 loan in April 2010 and still owe money by April 2035, the remainder is cancelled.

This write-off only applies if you haven’t fully repaid your loan by the deadline. It provides a safeguard for borrowers with lower incomes or long repayment periods.

Note that if you leave the UK, the write-off timeline may differ. Also, any outstanding loan balance after write-off isn't counted as taxable income.

Interest Rate Cap for 2026/27

Interest rates on student loans vary by plan and income. Plan 2 loans have an interest rate linked to inflation plus a variable rate dependent on earnings. For 2026/27, the standard interest rate will be capped at 6%, which is lower than the previous year’s 6.3% cap.

This cap means borrowers won’t pay more than 6% interest annually on their Plan 2 loans, even if inflation rises sharply. It offers some protection against rising borrowing costs.

Plans 1 and 4 use a different model where interest is tied directly to the Retail Price Index (RPI), which was 4.2% as of the latest data, so their rates will hover around that figure.

Plan 5 loans have a fixed interest rate, currently set at 4.5% for 2026/27, offering some predictability for borrowers.

Interest rates are reviewed annually every September, so expect updates based on economic conditions.

Keep these 2026 thresholds in mind when budgeting. Your repayments start only when your income crosses your plan’s threshold, and interest rates for Plan 2 loans will be capped at 6% next year, easing costs slightly. Voluntary overpayments can speed up clearing your debt, but there’s no penalty if you stick to minimum payments. And remember, after 25 or 30 years depending on your plan, any leftover loan balance is written off.