Should I Repay My Student Loan Early?
Decide whether to make voluntary student loan overpayments or invest the money instead. Compares the effective interest rate on your student loan vs investment returns, and calculates the probability your loan will be written off.
Frequently Asked Questions
Should I repay my student loan early?
For most people on Plan 2 and Plan 5, the answer is NO. These loans are written off after 30 or 40 years respectively. Graduates who don't earn well above the repayment threshold are unlikely to clear the full balance — so voluntary overpayments are wasted. Only repay early if you're high-earning and will definitely clear the loan before write-off.
What is the student loan 'write-off'?
At the end of the loan term, any remaining balance is cancelled ('written off') by the Student Loans Company with no financial penalty. Plan 1: 25 years. Plan 2: 30 years. Plan 5: 40 years. Postgraduate Loan: 30 years. This transforms the loan from a traditional debt into something more like a graduate tax.
When does it make sense to repay student loans early?
Repaying early makes financial sense only if: (1) your income will be consistently high enough to repay the full balance before write-off, and (2) the loan interest rate is higher than what you could earn investing. For high earners on Plan 2 (interest up to RPI+3%), early repayment may be worth considering.
What is the current student loan interest rate?
Plan 2 (England/Wales pre-2023): RPI + 0-3% depending on income (capped at Government Rate cap — approximately 4.9% for 2025/26). Plan 5 (England, from 2023): RPI (approximately 2.5%). Plan 1 (Scotland, NI, pre-2012): Bank of England base rate + 1% (approximately 4.25%).
What are the repayment thresholds?
Plan 2: £27,295/year (£2,274/month). Plan 5: £25,000/year. Plan 1: £24,990/year. Postgraduate: £21,000/year. You repay 9% (PG: 6%) of income above the threshold. Below the threshold, you pay nothing regardless of loan balance.
Does the student loan affect my credit score?
No — student loans do not appear on credit records and are not considered by mortgage lenders when assessing creditworthiness. However, the monthly repayment deducted from salary does reduce take-home pay, which may affect how much mortgage lenders will lend.
What if I work abroad?
If you work overseas, you must notify the Student Loans Company and make income-contingent repayments based on your overseas earnings and the cost of living in the country you're in. Different thresholds apply per country. Failure to declare overseas earnings can result in a debt collection action.
Plan 5 vs Plan 2 — which is worse?
Plan 5 (post-2023 England) is generally more expensive for many graduates: the repayment threshold is lower (£25,000 vs £27,295), the term is 40 years (vs 30), and the interest rate is RPI only. This means more graduates will repay more over a longer period before write-off compared to Plan 2.