Plan 4 in one paragraph: Scottish undergraduate loans from 1998 onwards. For 2026/27, threshold £32,745 (the highest of any UK loan plan), 9% above that, interest RPI only (no income-based premium), 30-year write-off. Plan 4 has the most generous economic terms of any current UK student loan plan.
Who is on Plan 4?
- Anyone who took out an undergraduate loan from Student Awards Agency Scotland (SAAS) for study in Scotland from 1998 onwards.
- This includes Scottish-domiciled students studying in Scotland (free tuition) and non-Scottish students at Scottish universities (paying tuition).
- Scottish undergraduates studying outside Scotland are typically not on Plan 4 — they'd be on Plan 1, 2 or 5 depending on the host country's plan rules and start date.
You can check at your SAAS account or your SLC account.
The 2026/27 repayment math
9% of gross earnings above £32,745 per year — the highest UK threshold.
| Gross annual earnings | Annual repayment | Monthly repayment |
|---|---|---|
| £30,000 | £0 | £0 |
| £35,000 | £203 | £17 |
| £45,000 | £1,103 | £92 |
| £60,000 | £2,453 | £204 |
| £85,000 | £4,703 | £392 |
Compared with Plan 2 (threshold £28,470), a Plan 4 borrower earning £45,000 repays £385 less per year. Over 30 years that's roughly £11,500 less in nominal repayments.
How Plan 4 interest works (the kindest formula)
Plan 4 interest is the lower of RPI (March prior year) or Bank of England Bank Rate + 1% — the same formula as Plan 1, and crucially no income-based premium.
This means Plan 4 is the only plan where:
- Your high earnings don't penalise you on the interest rate
- The Bank Rate cap regularly binds, often keeping rates well below RPI
- The loan grows in real terms only during high-Bank-Rate periods
For Plan 4 borrowers, the loan is genuinely the cheapest unsecured borrowing they will ever access — cheaper than a mortgage in many years.
Plan 4 vs Plan 2: side-by-side
| Feature | Plan 2 | Plan 4 |
|---|---|---|
| Threshold 2026/27 | £28,470 | £32,745 |
| Repayment rate | 9% | 9% |
| Interest while studying | RPI + 3% | RPI (capped) |
| Interest after, low income | RPI only | RPI (capped) |
| Interest after, high income | RPI + 3% | RPI (capped) |
| Write-off | 30 years | 30 years |
Plan 4 is structurally better for the borrower on every dimension except equivalence on the repayment percentage. If you have a choice between systems (you generally don't), Plan 4 is the one to want.
Should I overpay Plan 4?
Almost certainly no, for most borrowers. The combination of:
- High repayment threshold (£32,745)
- Low capped interest rate
- 30-year write-off
...means a substantial fraction of Plan 4 borrowers don't repay in full. And for those who do, the interest cost is so low that other uses of money (pension, ISA, mortgage overpayment, even a mortgage at 5%) usually beat overpaying the loan.
The mental model: Plan 4 is the closest any UK student loan gets to a true subsidised loan. Treat it as such.
Worked example: Scottish graduate, £42,000 salary, £30,000 balance
Salary £42,000, balance £30,000, interest at 5% (Bank Rate 4% + 1% cap binding).
- Annual repayment: (42,000 − 32,745) × 9% = £833
- Annual interest: 30,000 × 5% = £1,500
- Net balance change Year 1: +£667 (balance grows)
If salary grows at 3% nominal, by year 15 the salary is ~£65,000 and annual repayment is ~£2,903. Balance would be ~£28,000 (interest still slightly above repayment for a while, then declining). Projected payoff around year 24.
Total repaid: roughly £35,000-£40,000 over 24 years for a £30,000 starting balance. Very modest real cost given inflation over 24 years would erode the real burden further.
Common Plan 4 mistakes
- Assuming Plan 4 = Plan 1. Similar interest formula, but different threshold (Plan 4 is higher, more generous). Don't apply Plan 1 advice mechanically.
- Worrying about the headline balance. The balance number on your statement is mostly irrelevant to your monthly cost. PAYE-mediated repayments are what you actually feel.
- Choosing to repay in lump from inheritance/bonus. Plan 4's economics are so favourable that this is almost always a worse use of money than pension contributions or ISA filling.
- Moving abroad without notifying SLC. Overseas repayment is your responsibility — HMRC PAYE can't enforce it. Failing to declare can lead to default and penalties.
Sources
Related content
- Student loan repayment calculator — runs the math for any plan + earnings combination
- Plan 1 explained — pre-September-2012 starters in England, Wales and NI
- Plan 2 explained — September 2012 to July 2023 starters in England + Wales
- Plan 4 (Scotland) explained — Scottish students from 1998
- Postgraduate Loan explained — Master's and PhD loans, separate threshold
- Plan 5 overpayment trap — why most Plan 5 borrowers should not overpay
How UK Tax Drag holds itself to account
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