Should I Repay Student Loan Early?

This calculator compares two strategies: making voluntary lump-sum repayments to clear your student loan early versus investing that money instead. Early repayment saves interest but only makes financial sense if you would otherwise repay the loan in full. If you are on track for write-off, early repayment is effectively giving money back to the government rather than buying yourself anything.

The comparison models both routes month by month until the loan clears or is written off, with your salary rising each year, thresholds uprated as announced and interest at 2026/27 rates. It first compares the total you pay with and without the lump sum, counting the lump sum itself. It then compares investing the lump sum, with no tax on growth as in an ISA, against repaying and investing each repayment you no longer have to make. Take a Plan 2 balance of £30,000 on a £50,000 salary with 4% pay rises. Left alone, repayments total £50,288 and the loan clears after 16 years 4 months. Paying £5,000 now cuts the total to £43,134 including the lump sum, £7,155 less, and clears the loan 2 years 11 months sooner.

A key rule of thumb applies before any of that: only consider early repayment if you are confident you will repay the full balance before write-off. If your projected repayments clear the balance and its interest before the write-off date, early repayment saves money. Otherwise the money is better invested or used elsewhere. Modelling that means sketching your earnings trajectory, from starting salary through average yearly raises to peak earnings, working out annual repayments at 9% above the threshold, and seeing whether the balance clears before the 30 or 40-year write-off arrives. The Student Loans Company calculator on gov.uk gives a basic version and the Money Saving Expert Student Loan Calculator a more detailed one.

Two groups tend to clear their loans. Plan 2 graduates with stable income growing well above the threshold are likely to repay in full, so early repayment genuinely saves money. On a £30,000 Plan 2 balance and a £50,000 salary, a £25,000 lump sum cuts the total paid from £50,288 to £30,431 including the lump sum, a saving of £19,857, though none of that materialises if the loan would have been written off first. More than half of recent Plan 5 borrowers, with a 40-year term and interest at RPI only, are forecast to repay in full, which puts the decision on a similar footing to overpaying a mortgage.

Timing matters as much as amount. A lump sum cuts the balance that interest is charged on straight away: £5,000 off a Plan 2 loan charging 5.77%, the 2026/27 rate on a £50,000 salary, avoids about £288 of interest in the first year alone, and that saving compounds for as long as the loan would have run. Regular overpayments work the same way but more slowly, since each one only starts saving interest from the month it is paid. Either way, the saving only becomes money in your pocket if you would otherwise have repaid in full.

The competing use is almost always a pension or ISA. A £100 gross pension contribution costs a basic-rate taxpayer £80, or £60 for a higher-rate taxpayer who claims the extra relief, with an Annual Allowance of £60,000 available. Set that against student loan interest of 4.1% on Plans 1, 4 and 5 in 2026/27, or 4.1% to 6% on Plan 2 depending on income. When the loan is heading for write-off, repaying early earns nothing. When it will clear in full, repaying earns roughly the loan's interest rate with no risk, which the calculator weighs against the investment return you enter.

Write-off dates differ by plan and are the single most important input. Plan 1 loans are written off 25 years after the April you were first due to repay if your first loan was taken on or after 1 September 2006, or at age 65 if it was taken before then. Plan 2, for English students who started between 1 September 2012 and 31 July 2023 and Welsh students from 1 September 2012, runs 30 years from the April you were first due to repay. Plan 4 in Scotland also runs 30 years, and Plan 5, for English students starting on or after 1 August 2023, runs 40 years. Postgraduate loans run 30 years. All loans are cancelled on death with no claim on the estate, and the Student Loans Company may cancel a loan if you claim certain disability benefits, while bankruptcy usually does not clear it.