Most student loans funded through the Student Awards Agency Scotland (SAAS) are Plan 4. You repay 9% of earnings above the Plan 4 threshold, not a fixed instalment based on your balance. For the 2026–27 tax year, the threshold is £33,795 a year (£2,816.25 a month or £649.90 a week). Interest is added to the balance from the first payment, while any remaining balance is cancelled under a rule determined mainly by when your first loan payment was made.
The interest rate changes over time and the repayment threshold changes by tax year. The latest specifically documented Plan 4 rate in the available official guidance is 3.2% for 1 September 2025 to 31 August 2026; you should check the Student Loans Company’s live rate before treating any figure as current after that date.
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First confirm which plan covers your loan
A loan paid through SAAS is generally a Plan 4 loan. That remains true even if you later move elsewhere in the UK or work overseas. However, people who have borrowed through more than one UK funding system can hold loans under different plans. Check your Student Loans Company account or correspondence rather than identifying the plan solely from where you now live or work.
Your plan controls the repayment threshold, percentage and cancellation rules. A postgraduate loan can run alongside Plan 4 and uses its own repayment rules, so deductions for the two loans may appear together on a payslip.
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How much you repay
The 9% income rule
Plan 4 repayment is 9% of earnings above the threshold for the relevant tax year. It is not 9% of the amount you borrowed, and the outstanding balance does not determine the required payroll deduction.
| Period | Plan 4 threshold from April 2026 | Rate applied above threshold |
|---|---|---|
| Annual income | £33,795 | 9% |
| Monthly pay period | £2,816.25 | 9% |
| Weekly pay period | £649.90 | 9% |
These figures are the HM Revenue & Customs thresholds applying from April 2026 (the 2026–27 tax year). Do not substitute the £32,745 threshold stated in the 2025–26 SAAS terms guide; that figure applies to the earlier tax year.
Worked examples
If your annual income is £40,000, the amount above the 2026–27 annual threshold is £6,205. Nine per cent of that excess is £558.45 over a full year, assuming your earnings are spread in a way that produces the annual result.
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Why a bonus can create a deduction
Employers normally apply the monthly or weekly threshold separately in each pay period. Payroll does not wait until the end of the tax year to see whether your total income will stay below the annual limit. A bonus, overtime, commission or an unusually high month can therefore produce a student-loan deduction even when your eventual annual income is below £33,795.
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If your total income for the year ends below the applicable annual threshold, you can ask for a refund of qualifying deductions. The refund is not automatic: keep your payslips and make the request through the process set out by the Student Loans Company or HMRC.
How repayments are collected
Employees
Repayments normally begin in the April after you finish or leave your course, once your earnings exceed the relevant threshold. Your employer collects the amount through PAYE, and the student-loan deduction appears separately on your payslip. A change of employer should not change your plan, but you should provide accurate loan information on the starter declaration so deductions begin under the correct rules.
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Self-employed borrowers
If you are self-employed, the calculation is made through Self Assessment rather than an employer payroll. Your return determines the income on which the 9% charge is based, and HMRC collects the amount with your tax and National Insurance liabilities.
Multiple deductions
A postgraduate loan may be collected at the same time as Plan 4. Each loan has a separate threshold and percentage, so the combined deduction can be higher than the Plan 4 amount alone. Your payslip or Self Assessment calculation should identify the separate elements.
How Plan 4 interest is calculated
When interest starts
Interest begins on the date the first payment is made to you or to your university or college. It is calculated daily on the balance and added monthly. Because interest is added to the balance, later interest can be charged on earlier interest; the terms describe this as compound interest.
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The rate formula
The Plan 4 rate is the lower of:
- the Retail Prices Index (RPI) rate used under the student-loan rules; or
- the Bank of England base rate plus one percentage point.
The rate is usually set on 1 September using the previous March’s RPI, but it can change during the year when the formula requires it. The Student Loans Company documented a rate of 3.2% for 1 September 2025 to 31 August 2026. That is a dated historical rate, not a claim about the live rate on 13 October 2026. Check the current SLC Plan 4 rate before using it in a projection.
Interest does not set your monthly deduction
The rate changes how quickly the balance grows and therefore how long repayment might continue. It does not change the 9% percentage or the income threshold used to calculate a PAYE or Self Assessment deduction. Two borrowers with the same income generally have the same required repayment for that period even if their balances and accrued interest differ.
When a Scottish student loan is written off
“Written off” or “cancelled” means the remaining student-loan balance is removed under the statutory rule. It is not an income-tax deduction. The key fact is the date on which the first loan for the course was paid.
| First loan payment | Cancellation rule | Dates needed to work it out |
|---|---|---|
| On or after 1 August 2007 | 30 years after the April when you first became due to repay | The April repayment first became due |
| Before 1 August 2007 | At age 65 or 30 years after the April when repayment first became due, whichever comes first | Your 65th birthday and the April repayment first became due |
For a post-1 August 2007 loan, count 30 years from the relevant April—not from graduation, the date of your final payment, or the date interest started. For an earlier loan, cancellation occurs at whichever of the age-65 date or the 30-year date arrives first.
Other cancellation circumstances
The Student Loans Company states that a student loan is cancelled when the borrower dies. It may also be possible to cancel a loan where illness or disability prevents the borrower from working and the borrower receives specified disability benefits. Illness or disability alone does not guarantee cancellation; eligibility depends on the applicable evidence and benefit conditions.
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Should you overpay a Plan 4 loan?
You can make voluntary extra payments at any time, but they are separate from the statutory income-based deduction. An overpayment does not reduce the amount your employer, HMRC or an overseas assessment calculates for the same period. It generally cannot be refunded, except in circumstances such as a loan being fully repaid and too much being collected.
When an overpayment can help
If your lifetime earnings make it likely that you will repay the full balance before the cancellation date, paying earlier can reduce the balance on which future interest accrues. The potential benefit depends on the applicable interest rate, your current balance, the size and timing of the extra payment, and how many years remain before cancellation.
When it may not reduce your cost
If your expected repayments will not clear the balance before the applicable write-off, an extra payment may simply replace amounts that would eventually have been cancelled. In that situation, the payment can increase your total out-of-pocket cost rather than lower it.
A practical decision check
- Confirm that every loan you hold is Plan 4 or identify any separate plan, such as a postgraduate loan.
- Record the outstanding balance and the date your first loan payment was made.
- Calculate the cancellation date using the correct pre- or post-1 August 2007 rule.
- Estimate income over your working life rather than relying only on this year’s salary.
- Compare the likely total of future required repayments with the balance and interest that could accrue before cancellation.
- Keep an emergency fund and clear higher-cost debts before committing money that generally cannot be reclaimed.
The official rules do not prescribe one answer for every borrower. The decision turns on whether you are likely to repay in full, your alternative use for the money, and the uncertainty in your future income.
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Common situations and what to do
You changed jobs and deductions look wrong
Check that your new employer received the correct starter information and that the payslip identifies Plan 4. If a deduction was made under the wrong plan, contact the employer’s payroll team and the Student Loans Company with your account details; keep the payslip showing the error.
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Your annual income will be below the threshold but a deduction was taken
Payroll may have responded correctly to a high individual pay period. Once the tax year closes, compare total income with the annual threshold and request any qualifying refund. Do not assume HMRC will issue it without your claim.
You work outside the UK
Moving overseas does not itself cancel a SAAS loan. Contact the Student Loans Company before leaving and provide the information it requests for an overseas income assessment. The amount due is still determined under the plan rules, but the collection route differs from UK PAYE.
Your balance is rising despite deductions
That can happen when interest added to the balance exceeds the amount being credited from your income-based payments. Check the interest rate period, payment history and balance in your SLC account. A rising balance is not, by itself, evidence that payroll has used the wrong percentage.
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- Your SLC plan and loan account numbers.
- The date and amount of the first payment for each loan.
- Payslips showing student-loan deductions and any bonuses.
- Annual income records and Self Assessment calculations where relevant.
- Correspondence confirming a refund, overseas assessment or cancellation.
These records let you verify the plan, explain an unusual pay-period deduction and establish the correct write-off timetable.
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