Answers · UK 2025/26
Is it worth paying off your student loan early in the UK?
For most UK borrowers, voluntary early repayment of a student loan is not financially beneficial. Student loans are not like commercial debts — repayments are income-contingent, interest is subsidised for Plan 1/Plan 5, and unrepaid balances are written off after 25–40 years. Overpaying usually means paying more than you would have otherwise.
Full answer
**Why early repayment is usually a poor decision** **1. The write-off safety net** UK student loans are written off after a set period regardless of the balance: - Plan 1: 25 years after the April following graduation (or age 65) - Plan 2: 30 years after the April following graduation - Plan 5 (new loans from 2023): 40 years If you are unlikely to clear the loan within this period anyway, voluntary overpayments reduce your total write-off benefit. **2. Repayment is income-contingent** You only repay while earning above the threshold. If you lose your job, take time out, go part-time, or reduce your hours, repayments stop automatically. A commercial loan demands payment regardless. **3. Interest comparison** Plan 1 interest: lower of RPI or base rate + 1%. With current inflation/rates, this may be 3–5%. If you can earn more than this in a pension, ISA, or paying down other higher-interest debt, it is better to invest/overpay those instead. **Example: James, Plan 2 borrower** James has £45,000 of student debt at RPI + 3% (while working). He earns £35,000 and repays £549/year (9% of £6,090 above £29,000 Plan 2 threshold). His balance is growing. But in 30 years the remaining balance is written off — potentially £60,000+. Every £1,000 he voluntarily overpays reduces this write-off. **When early repayment CAN make sense** - High earners (£80,000+) on Plan 2 who will definitely clear the loan before write-off: the interest rate (up to RPI + 3%) can exceed returns on cash savings - Plan 5 borrowers with very high incomes facing 40-year term and high interest costs - Psychological benefit of being debt-free (non-financial consideration) **Key rule of thumb** Model your repayment trajectory using the government's student loan repayment calculator. If your salary growth means the loan will likely be fully repaid well before write-off, overpayment may save interest. If not, invest instead.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.