Just under half of today's students are forecast never to fully repay their loan — by design, not failure
Student loan repayment scales with income and is written off after decades, whatever remains. A growing balance does not mean a graduate ends up paying more.
DfE forecasts that 55% of the 2025/26 entry cohort (Plan 5) will repay their loan in full — down from 56% the year before. Those who do are expected to take a median of 30 years; anything still owed after 40 years is written off by law.
How income-contingent repayment actually works
Repayment is 9% of income above the threshold, taken automatically through the same system as income tax (PAYE for employees, self-assessment for the self-employed) — not a fixed monthly bill a borrower chooses to pay or not. A low earner pays nothing at all in a given month or year; a high earner pays more. After the write-off period (30 years for Plan 2, 40 for Plan 5), any remaining balance — however large — is cancelled by law, not chased.
View as table
| Plan | Threshold | Rate | Interest while studying | Interest after | Written off after |
|---|---|---|---|---|---|
| Plan 2 | £29,385/yr | 9% | RPI + 3% | Income-scaled: RPI alone at or below the threshold, rising to RPI + 3% at £52,884 or more, sliding between | 30 years |
| Plan 5 | £25,000/yr | 9% | RPI only | RPI only, at every income level — no additional margin, unlike Plan 2 | 40 years |
What changed with Plan 5
Introduced for courses starting from August 2023: a lower repayment threshold than Plan 2 (more of a graduate's income is captured), balanced by a longer write-off period and interest fixed at RPI rather than RPI+3% — a different trade-off, not simply "worse" or "better" than Plan 2.
Not a phrase DfE itself uses
You will sometimes see student loan repayment described as working "more like a tax than a debt." That comparison is used by independent commentators (including the IFS) to explain the mechanism, not a phrase DfE itself uses — DfE's own statistical releases use standard debt terminology throughout. The comparison is a useful way to understand HOW repayment works, not an official government description of what it is.
Who is forecast to repay in full
DfE's own forecast is that 39% of the value of Plan 2 loans issued will never be repaid (2025/26 forecast) — the "RAB charge", the government's own measure of the loan system's fiscal cost.
Plan 5's own subsidy rate — not published here
DfE also forecasts a subsidy rate for Plan 5, but independent checks of this page's sources returned inconsistent figures (30%, 33% and 34% across different extracts of the same release) that could not be resolved to one confident number from the underlying data table in the time available. Rather than publish an uncertain figure, this page states only that Plan 5's subsidy rate is lower than Plan 2's, which every source agrees on, without a specific percentage.
A design choice, not a failure of the system
Forecasting that 45% of a cohort will not fully repay is not a sign the loan system is failing — it is built into the design. Income-contingent repayment is meant to protect lower earners from a debt they cannot afford, at the cost of a larger taxpayer subsidy than a conventional loan would carry. Both the forecast and the subsidy are published every year precisely so this trade-off is visible.
Why a growing balance does not mean paying more
On Plan 2, a borrower with a balance of roughly £50,000 needs to earn roughly £63,000 a year before their repayments start to exceed the interest accruing — below that, the balance can keep growing even while the borrower repays every month, because interest is added faster than 9% of their income above the threshold can clear it. That is not a sign of failing to repay; it is how a loan sized to income, rather than to what was borrowed, behaves for someone on a modest salary.
This is IFS's own estimate, not DfE's
This is IFS's own independent estimate, not a DfE figure — DfE does not publish an equivalent break-even calculation. No comparable figure for Plan 5, from any source, was found; this page does not invent one.
A growing balance still does not mean a graduate on a modest income will eventually pay more overall than one on a high income repaid quickly — the write-off after 40 years caps what anyone actually pays, regardless of how large the balance grew in the meantime.
What this does not show
Two figures in the original brief for this page did not check out
A candidate pairing of exact balance/earnings break-even figures for Plan 2 and Plan 5 could not be verified against any DfE publication. The closest real figure — IFS's independent ~£50,000/~£63,000 estimate for Plan 2 — is used above, correctly attributed; no equivalent for Plan 5 exists in any source found, and none has been invented for this page.
Where the unrecovered money comes from or goes
This page explains what is and isn't repaid, not how the shortfall is accounted for in government finances — that is Chapter 11C.
Whether repaying in full or being written off is the "better" outcome for an individual
That depends on lifetime earnings this page does not model for any individual borrower — Chapter 11D covers net financial returns to a degree.
Last verified 2026-08-31. Data: DfE, "Student Loan Forecasts for England 2025-26".
Related pages
- In this sectionThe price of a degreeThe rest of this chapter.
- In this sectionThe student debt timelineHow much is borrowed and outstanding, in nominal and real terms.
- In this sectionWhere does the money actually go?What happens to the balances that are never repaid.
- In this sectionEducationThe other chapters, and how this section is built.
Scope and definitions
England, not the UK
Education is devolved. Every figure on this page is England only. Scotland, Wales and Northern Ireland operate different frameworks with different legal definitions, and their figures are not directly comparable.
Forecasts, not observed outcomes
The 55%/45% split and the RAB charge are DfE's own forward-looking forecasts, revised every year as graduate earnings and policy change — not a count of what has actually happened to any cohort yet, since most current borrowers are still decades from their write-off date.