The Real Cost of Student Loans and National Insurance (2025/26)
When calculating your take-home pay, it's crucial to understand the impact of student loans and National Insurance contributions. These deductions can significantly reduce your net salary, especially for graduates and higher earners. This comprehensive guide shows you the real cost of these deductions and how to use our UK tax calculator to see your actual earnings.
Student Loan Repayment Plans (2025/26)
The UK has four main student loan repayment plans, each with different thresholds and rates:
| Plan | Repayment Threshold | Repayment Rate | Who It Applies To |
|---|---|---|---|
| Plan 1 | £26,065 | 9% | Pre-2012 English/Welsh students |
| Plan 2 | £28,470 | 9% | Post-2012 English/Welsh students |
| Plan 4 | £32,745 | 9% | Scottish students |
| Plan 5 | £25,000 | 9% | Post-2023 English students |
| Postgraduate Loan | £21,000 | 6% | Postgraduate students |
National Insurance Rates (2025/26)
National Insurance contributions are calculated differently from income tax:
NI Calculation Rules
- NI Threshold: £12,584 per year
- Basic Rate (8%): £12,585 - £50,284
- Higher Rate (2%): Over £50,284
- No NI on income below threshold
Calculate Your Real Take-Home Pay
Use our free UK tax calculator to see exactly how much you'll take home after student loans and National Insurance.
Real-World Examples
Example 1: £30,000 Salary with Plan 2 Student Loan
Income Tax Calculation
- Gross Salary: £30,000
- Personal Allowance: £12,570
- Taxable Income: £17,430
- Income Tax (20%): £3,486
National Insurance Calculation
- NI Taxable Income: £30,000 - £12,584 = £17,416
- NI (8%): £1,393.28
Student Loan Repayment (Plan 2)
- Repayment Threshold: £27,295
- Repayable Income: £30,000 - £27,295 = £2,705
- Student Loan Repayment (9%): £2,705 × 0.09 = £243.45
Final Take-Home Pay
- Gross Salary: £30,000
- Income Tax: -£3,486
- National Insurance: -£1,393.28
- Student Loan: -£243.45
- Take-Home Pay: £24,877.27
- Monthly Take-Home: £2,073.11
Example 2: £50,000 Salary with Plan 2 Student Loan
Income Tax Calculation
- Gross Salary: £50,000
- Personal Allowance: £12,570
- Taxable Income: £37,430
- Income Tax (20%): £7,486
National Insurance Calculation
- NI Taxable Income: £50,000 - £12,584 = £37,416
- NI (8%): £2,993.28
Student Loan Repayment (Plan 2)
- Repayment Threshold: £27,295
- Repayable Income: £50,000 - £27,295 = £22,705
- Student Loan Repayment (9%): £22,705 × 0.09 = £2,043.45
Final Take-Home Pay
- Gross Salary: £50,000
- Income Tax: -£7,486
- National Insurance: -£2,993.28
- Student Loan: -£2,043.45
- Take-Home Pay: £37,477.27
- Monthly Take-Home: £3,123.11
Impact on Different Salary Levels
£25,000 Salary
Plan 1 Student Loan
- Repayable Income: £25,000 - £22,015 = £2,985
- Student Loan Repayment: £268.65 per year (£22.39 per month)
Plan 2 Student Loan
- Repayable Income: £0 (below threshold)
- Student Loan Repayment: £0
Plan 4 Student Loan
- Repayable Income: £0 (below threshold)
- Student Loan Repayment: £0
Plan 5 Student Loan
- Repayable Income: £0 (below threshold)
- Student Loan Repayment: £0
£40,000 Salary
Plan 2 Student Loan
- Repayable Income: £40,000 - £27,295 = £12,705
- Student Loan Repayment: £1,143.45 per year (£95.29 per month)
- Take-Home Pay Reduction: 2.86%
£80,000 Salary
Plan 2 Student Loan
- Repayable Income: £80,000 - £27,295 = £52,705
- Student Loan Repayment: £4,743.45 per year (£395.29 per month)
- Take-Home Pay Reduction: 5.93%
Combined Impact: Tax + NI + Student Loans
The combined effect of all deductions can be significant:
| Salary | Income Tax | National Insurance | Student Loan (Plan 2) | Total Deductions | Take-Home Pay | Effective Tax Rate |
|---|---|---|---|---|---|---|
| £30,000 | £3,486 | £1,393.28 | £243.45 | £5,122.73 | £24,877.27 | 17.1% |
| £40,000 | £5,486 | £2,193.28 | £1,143.45 | £8,822.73 | £31,177.27 | 22.1% |
| £50,000 | £7,486 | £2,993.28 | £2,043.45 | £12,522.73 | £37,477.27 | 25.0% |
| £80,000 | £17,486 | £4,010.32 | £4,743.45 | £26,239.77 | £53,760.23 | 32.8% |
Key Insights
Student Loan Impact by Plan
- Plan 1: Lowest threshold, affects more people
- Plan 2: Higher threshold, but still significant impact
- Plan 4: Highest threshold, affects fewer people
- Plan 5: New plan with £25,000 threshold
National Insurance Impact
- Below £12,584: No NI contributions
- £12,585 - £50,284: 8% rate (significant impact)
- Above £50,284: 2% rate (much lower impact)
Combined Marginal Rates
- £30,000 with Plan 2: 37% (20% tax + 8% NI + 9% student loan)
- £50,000 with Plan 2: 57% (40% tax + 8% NI + 9% student loan)
- £80,000 with Plan 2: 51% (40% tax + 2% NI + 9% student loan)
Strategies to Minimize Impact
Student Loan Strategies
- Salary sacrifice: Reduce gross salary to stay below thresholds
- Pension contributions: Reduce taxable income
- Voluntary repayments: Pay off loans faster to reduce interest
- Consider loan forgiveness: Some careers offer loan forgiveness
National Insurance Strategies
- Salary sacrifice: Reduce NI contributions
- Pension contributions: Reduce NI taxable income
- Benefits in kind: Some benefits don't attract NI
Regional Differences
Scotland
Scotland has different income tax rates but the same NI and student loan rules:
- Higher tax rates for most income levels
- Same NI thresholds and rates
- Plan 4 student loans have higher threshold (£31,395)
England, Wales & Northern Ireland
- Standard UK tax rates
- Plan 1, 2, and 5 student loans available
- Same NI rules as Scotland
Calculate Your Real Take-Home Pay
Don't be surprised by your actual take-home pay. Use our UK tax calculator to see exactly how much you'll receive after all deductions.
Frequently Asked Questions
When do student loan repayments start?
Student loan repayments start from the April after you graduate or leave your course, but only if your income is above the repayment threshold for your plan.
Do I pay student loans if I'm self-employed?
Yes, self-employed people also pay student loan repayments. They're calculated through your Self Assessment tax return.
Can I avoid National Insurance?
Most employed people must pay NI, but there are some exemptions for very low earners and certain types of employment.
What happens if I have multiple student loans?
If you have loans from different plans, you'll pay 9% on income above the highest threshold that applies to you.
Do student loans affect my credit score?
No, student loan repayments don't affect your credit score as they're not traditional loans.
Can I pay off my student loan early?
Yes, you can make voluntary repayments to pay off your loan faster, but consider whether this is financially beneficial given the low interest rates.