What is the difference between plan 1, plan 2 and plan 4 student loans? (2024)

FAQs

What is plan 1, plan 2, and plan 4 student loan? ›

Plan 2 refers to a student loan taken out from September 2012 onwards, in England or Wales. Older loans (from England or Wales) and loans taken out in Northern Ireland, are called plan 1 loans. Loans taken out in Scotland are called plan 4 loans.

Best repayment option: standard repayment. On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you'll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

Repayment plan 5 is a new repayment plan, being introduced for students starting undergraduate and Advanced Learner Loan courses on or after 1 August 2023. You won't be expected to make repayments to your plan 5 student loan until April 2026 at the earliest, even if you leave your course early.

Unlike Plan 2 loans, the interest rate on Plan 1 loans is always the same whether you're studying or have graduated, and isn't affected by how much you're earning either. RPI in March 2024 was 4.3%. As this is lower than the current bank rate (5%) + 1%, the Plan 1 interest rate has been set at 4.3%.

You're on: Plan 2 if you studied an undergraduate course or a Postgraduate Certificate of Education (PGCE) a Postgraduate Loan plan if you studied a postgraduate master's or doctoral course.

Yes, you can pay your student loan in full at any time. If you are financially able to do so, it may make sense for you to pay off your student loans early to save money on interest. Lenders typically call this “prepayment in full.” Generally, there are no penalties involved in paying off your student loans early.

Federal loans generally provide lower interest rates with access to forbearance, deferment, income-driven repayment (IDR) plans and student loan forgiveness programs. Most federal loans don't require a credit check, making them an ideal choice for all borrowers.

Best overall: College Ave

College Ave gets our nod for the best private student loan because this lender checks all the boxes. They provide loan amounts that vary from as low as $1,000 to the total cost of your entire school-certified expenses like tuition, fees and housing.

Below are some of the best student loan rates available as of July 14, 2023. These rates include discounts for autopay. Undergraduate: College Ave: 5.29% - 15.99% (variable APR) or 4.42% - 15.99% (fixed APR)

What is the monthly payment on a 5000 student loan? ›

The monthly payment on a $5,000 student loan ranges from $53 to $449, depending on the APR and how long the loan lasts. For example, if you take out a $5,000 student loan and pay it back in 10 years at an APR of 5%, your monthly payment will be $53.

Paying Off Your Loan Early

You may prepay all or part of your federal student loan at any time without penalty. Any extra amount you pay in addition to your regular required monthly payment is applied to any outstanding interest before being applied to your outstanding principal balance.

Plan 1 graduates repay 9% of everything they earn over £24,990. Bank of England base rate (as of September 2024) is 5% The current rate of interest (as of September 2024) is 4.3% The current rate of inflation (as of March 2024) is 4.3%

Student loans are forgiven after 25-30 years after you graduate, or when you turn 65, depending on when and where you took out your loan.

For undergraduate students, the interest rate for Direct Subsidized Loans and Direct Unsubsidized Loans is 6.53%. For graduate or professional students, the interest rate for Direct Unsubsidized loans is 8.08%.

Income-Driven Repayment (IDR) Forgiveness

If you repay your loans under an IDR plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years—or as few as 10 years under our newest IDR plan, the Saving on a Valuable Education (SAVE) Plan.

It also includes launching the most affordable student loan repayment plan ever – the SAVE plan – which cuts undergraduate loan payments in half, ensures borrowers never see their balance grow from unpaid interest, helps drop millions of borrowers' monthly payments down to $0, and cancels debt for low-balance borrowers ...

If you have a loan with a variable payment, it may make more sense to start with that debt before rates begin increasing. Alternatively, it might be better to refinance to a loan with a fixed rate if possible. Another option is to start with the loan that has the highest interest rate.

IDR plans calculate your monthly payment amount based on your income and family size. So if your income increases, so does your payment amount. On PAYE and IBR, we limit your payments so that even if your income increases, your payments never go higher than what you'd pay on the Standard Plan.