Should you overpay your student loan?

How repayments work

Repayments depend on what you earn, not on what you owe. You pay 9% of your income above your plan's threshold (6% above £21,000 for a Postgraduate Loan), collected through PAYE or Self Assessment. Earn less than the threshold and you pay nothing, however large the balance.

The write-off clock starts from the April after you left your course, when you were first due to repay. Older Plan 1 loans (taken before September 2006) are written off at age 65 instead.

Why many people never repay in full

Take a Plan 2 graduate with a £45,000 balance earning £35,000. They repay 9% of the £5,615 above the threshold: about £505 a year. At their income, interest is charged at about 4.8%, which adds roughly £2,170 a year. The balance grows, even though they're repaying every month.

Unless their pay rises a long way, the loan will still be there after 30 years, and it'll be written off. If they'd overpaid £5,000 along the way, the amount written off would just have been smaller. Their other repayments wouldn't have changed by a penny, so they'd have paid £5,000 more for nothing.

So for many borrowers it's more useful to think of the loan as an extra 9% tax on earnings above the threshold, for a fixed number of years. The Plan 2 threshold is also due to be frozen for three years from April 2027, which will mean higher repayments for many Plan 2 borrowers.

When overpaying can make sense

You'll clear it anyway. If your earnings mean you're on track to pay the loan off before the write-off date, every extra pound reduces the interest you'd otherwise pay. Higher earners on Plan 2, and many Plan 5 borrowers, whose loans run for 40 years and only charge inflation-level interest, can be in this position.

The balance is small, or the end is close. A Plan 1 borrower with a few thousand pounds left and steady earnings above the threshold may clear it in a few years regardless. Overpaying shortens that and saves some interest.

You want the monthly deduction gone. Repayments reduce your take-home pay, and mortgage lenders count them as an outgoing. Clearing the loan can help affordability, although paying a lump sum into a deposit often helps more.

Before you pay extra

You can't get it back. There's no penalty for paying extra, but voluntary repayments can't be refunded, even if the loan is later written off.

Compare the alternatives. Paying off a credit card, building an emergency fund or putting money into a pension, where you get tax relief, is often a better use of spare cash.

Check the whole picture. What matters is whether you'd repay in full over the life of the loan, which depends on your future pay rises as much as today's salary. The Student Loan calculator projects this year by year and shows whether an overpayment would save you anything.

See when your loan would be paid off or written off →

Common questions

Does a student loan affect my credit score? Plan 1, 2, 4 and 5 loans and Postgraduate Loans don’t appear on your credit file, so they don’t affect your credit score directly. Mortgage lenders do ask about them, though, and count the monthly repayments as an outgoing when they work out what you can afford.

What happens to the loan if I die? It’s cancelled. Nothing is taken from your estate, and your family doesn’t have to repay it. It can also be cancelled if you become permanently unfit to work because of illness or disability.

Do I still repay if I move abroad? Yes. You have to tell the Student Loans Company, and you then repay directly, based on what you earn and on thresholds set for the country you live in. If you don’t tell them, they can charge a fixed monthly amount based on the loan instead of your earnings.