Plan 4 Student Loan Repayment: The Scottish Guide

Scottish graduates repay student loans under Plan 4 — a system that differs significantly from the English plans in ways that are almost always more favourable. Most UK student finance content ignores Plan 4 entirely or lumps Scotland in with England. Here's the accurate picture.

Who is on Plan 4?

You are on Plan 4 if you are Scotland-domiciled and received a student loan from SAAS (Student Awards Agency for Scotland). This applies regardless of which UK country you studied in — if SAAS paid your loan, you repay under Plan 4.

Scottish students who studied in England and took a loan from Student Finance England are on Plan 2 (if they started before August 2023) or Plan 5 (if they started from August 2023 onwards). In that case, English repayment rules apply. This is an important distinction — check your loan documentation or HMRC records if you're unsure which plan you're on.

The 2026/27 repayment threshold

Plan 4 has the highest repayment threshold of any UK student loan plan. This means Scottish graduates start repaying later — at a higher income level — than graduates on other plans.

How repayments are calculated

You repay 9% of everything you earn above the threshold. Nothing below the threshold is ever repayable.

Example: earning £40,000/year on Plan 4

• Income above threshold: £40,000 − £31,395 = £8,605
• Annual repayment: 9% × £8,605 = £774.45/year
• Monthly deduction: £64.54/month

Example: earning £28,000/year on Plan 4

• Income is below the £31,395 threshold
• Annual repayment: £0

Repayments are collected through PAYE (if employed) or self-assessment (if self-employed). You don't manually send money — HMRC deducts it automatically.

Interest rate

Plan 4 interest is set at the lower of:

• RPI (Retail Price Index) inflation, or
• Bank of England base rate + 1%

This cap makes Plan 4 interest significantly lower than Plan 2 interest (which can reach RPI + 3%) and Plan 5 interest (RPI). During periods of high inflation, Plan 4 graduates benefit most from the base rate cap.

In practice, this means Plan 4 loans grow more slowly than English equivalents during high-inflation periods — though if income is below the threshold throughout, interest accumulation matters less because the loan is written off regardless.

When does the loan get written off?

Plan 4 loans are written off 30 years after the April following the end of your course. For a student who finishes in June 2026, the clock starts April 2027 — write-off in April 2057.

Any remaining balance at the 30-year mark is cancelled by HMRC with no tax implication. You do not inherit any residual debt.

Plan 4 vs Plan 2 vs Plan 5: side by side

The most striking difference is the maximum tuition debt: Scottish graduates at Scottish universities borrow nothing for tuition — SAAS pays the £1,820 fee directly to the university. The only SAAS loan is for living costs (maintenance). Compare this to English graduates who may borrow £9,535/year in tuition fees alone, on top of maintenance.

Checking which plan you're on

If you're unsure, log into your HMRC Personal Tax Account at gov.uk/personal-tax-account. Under "Student loan repayments" you'll see which plan type is recorded for you. If it shows incorrectly, contact SAAS (for pre-repayment queries) or HMRC (for in-repayment queries).

Self-employed and Plan 4

If you're self-employed, Plan 4 repayments are collected through self-assessment rather than PAYE. You declare your income in your tax return, and HMRC calculates the repayment amount and adds it to your tax bill. The threshold and rate (9% above £31,395) are the same — only the collection mechanism differs.

One practical difference: employed workers repay monthly through payroll with no cash flow impact. Self-employed workers make a lump-sum payment in January (when the tax bill is due), which requires discipline to set aside through the year. The loan itself doesn't know or care — interest continues to accrue on the outstanding balance regardless.

Moving abroad after graduating

If you move outside the UK after graduating, you still owe the loan — but repayments are calculated differently. SAAS (or HMRC, once in repayment) sets an overseas repayment threshold based on the cost of living in the country you're living in. The threshold may be higher or lower than £31,395, depending on the country.

You're required to notify SAAS when you move abroad and complete an overseas income assessment. If you don't, HMRC can still charge you repayments based on estimated UK earnings — which may be incorrect. Keep your contact details updated.

Loan write-off still applies after 30 years, regardless of where you live.

What happens if you overpay?

If your employer deducts loan repayments and you earn less than the threshold across the full tax year (e.g. you change jobs mid-year and earn less in the second half), you may have overpaid. HMRC will issue a refund automatically when you complete your tax return, or when P60 data confirms an overpayment.

If you make a manual overpayment — sending a lump sum directly to clear your loan — be aware that once paid, it cannot be recovered even if your circumstances change. There's rarely a financial benefit to overpaying a Plan 4 loan given the low interest rate, high threshold, and 30-year write-off. Run the numbers carefully before paying down the balance early.

Does the Plan 4 loan affect mortgages?

Student loan repayments show up as a monthly outgoing in affordability calculations. Most lenders treat them as a regular commitment similar to any other debt repayment — not as a credit liability. They reduce the income available for mortgage repayment rather than affecting your credit score.

At the Plan 4 level (9% of income above £31,395), the monthly deductions are modest enough that they rarely significantly affect mortgage affordability. On a £45,000 salary, the monthly Plan 4 deduction is roughly £102 — a factor in affordability, but not a barrier.

For full detail on SAAS — how much you can borrow, income thresholds, and what's repayable vs non-repayable — see the SAAS student finance guide.