Calculate Your Repayment
How to Use This Calculator
Enter Your Loan Details
Select your plan type, course start year and length, current loan balance, and your starting annual salary.
Input Your Savings Information
Enter your monthly savings, total available savings, and the expected alternative investment return rate.
Check and Analyze Results
Review the comparison between overpaying your loan versus investing, and determine which strategy offers better financial outcomes.
Fine-Tune Parameters (Optional)
Adjust the advanced options like inflation rate, salary growth, and interest rate caps to create more personalized scenarios.
Please note that this calculator does not constitute financial advice.
Understanding Student Loans
How Student Loans Work
UK student loans operate differently from regular loans. You only repay when your income exceeds the repayment threshold for your plan type.
Repayment basics:
- You repay 9% of income above the threshold (6% for Postgraduate Loans)
- Payment thresholds differ by plan, ranging from £21,000/year to £32,745/year (£1,750/month to £2,728/month)
Interest rates vary by plan:
- Plan 1 & 4: Bank of England base rate + 1% (currently 4.5% + 1.0%)
- Plan 2: Variable rate from RPI to RPI+3% based on income (uncapped)
- Plan 5: RPI (currently 4.3%)
Loans are written off depending on the plan: Plan 5 after 40 years; Plan 2, Plan 4, and Postgraduate Loans after 30 years; and Plan 1 after 25 years.
Should You Overpay?
For most graduates, making additional payments on your student loan may not be financially optimal.
When overpaying likely isn't worth it:
- If your loan is likely to be written off
- If you have higher-interest debts to clear first
- If you don't have an emergency fund established
When overpaying might make sense:
- If you have a high income that will fully repay your loan before write-off
- If loan interest rates exceed your potential investment returns
- If you don't have other major inflexible debts (like a mortgage) competing for your cash. (Having such debts makes the decision more complex and dependent on your risk appetite)
Always consider the opportunity cost: money used for overpayments could be used to pay off high interest debt or invested elsewhere for potentially higher returns.
Overpay vs. Invest
With extra income or savings, you can choose to overpay your student loan or invest the money elsewhere.
Overpayment advantages:
- Potentially pay off your loan years earlier
- Reduce the total interest accrued
- Free up monthly cash flow sooner for other goals
- Guaranteed "return" equal to your loan's interest rate
Investment advantages:
- Potential for higher long-term returns
- Benefit from compounding from an earlier starting point
- Greater liquidity and flexibility
- Better outcome if your loan would be written off anyway
If you have other high-interest / inflexible debt, paying that down first is usually the most financially optimal choice before considering overpayments or investments.
FAQ
Frequently Asked Questions
Key Steps:
- Invest Initial Savings Immediately: Any lump-sum savings you designate at the start are invested right away, beginning the compounding process immediately.
- Invest Monthly Savings: Each month, your specified “monthly savings” amount is invested directly, rather than being used for loan overpayments.
- Make Minimum Loan Payments Only: You continue to make only the required minimum payments on your student loan throughout its term (or until it's written off). No extra payments are made.
Repayment Process:
- Loan Repayment Timeline: The loan is paid off according to the standard schedule based on minimum payments, or it is written off at the designated time, whichever comes first. Required payments continue until one of these events occurs.
- Continuous Investment Growth: Your investments (from both initial and monthly savings) grow throughout the entire simulation period at your specified investment rate, benefiting from compounding over a longer time.
Long-term Advantage:
Why This Can Be Advantageous: The potential benefit comes from starting your investments earlier and allowing them to compound for the maximum possible time. If your expected investment return rate is significantly higher than your student loan interest rate, this strategy could potentially lead to greater overall wealth, even though you pay more interest on the loan itself compared to the overpayment strategy.
Key Steps:
- Use Initial Savings Immediately: Any lump-sum savings you designate at the start are applied directly to your loan balance right away. This immediately reduces the principal and the total interest you'll pay.
- Make Monthly Overpayments: Each month, your specified “monthly savings” amount is added on top of your required minimum student loan payment. This significantly speeds up the repayment process.
- Goal: Pay Off Early: The objective is to clear your student loan debt before it would normally be paid off through minimum payments or reach the write-off date.
Benefits of Paying Off Early:
- Save on Interest: By reducing the loan balance faster, you pay less interest over the life of the loan.
- Free Up Required Payments Sooner: Once the loan is fully repaid, you are no longer obligated to make the required monthly payments.
- Invest After Loan Payoff: Once the loan is paid off, for the remaining time until the original simulation end date, you invest both your monthly savings and the freed-up required payment amount.
Long-term Advantage:
Why This Can Be Advantageous: The potential benefit comes after the loan is paid off. You start investing a larger total amount each month (your monthly savings plus the freed-up required payment). Depending on the loan's interest rate versus your expected investment return rate, this can lead to greater overall wealth compared to only making minimum loan payments.
Our calculator simulates and compares two distinct strategies (“Overpayment” vs. “Invest Only”) over the loan's potential lifetime. It uses the official repayment thresholds, interest rate mechanics, and plan rules published by the Student Loans Company as its foundation.
To tailor the simulation to different potential economic futures and personal circumstances, you can adjust key assumptions including:
- Projected RPI rate
- Annual salary growth
- Annual threshold growth
- Interest rate cap
- Bank of England base rate
- Your potential alternative investment rate
By modifying these inputs, you can explore various “what-if” scenarios and visualize how each strategy might perform under different conditions.
- Current annual repayment thresholds:
- Plan1: £26,065
- Plan2: £28,470
- Plan4: £32,745
- Plan5: £25,000
- Postgrad: £21,000
- Interest rates vary by plan type:
- Plan 1 & 4: Lower of RPI or Bank of England base rate + 1%
- Plan 2: While studying: RPI + 3%
After studying: RPI to RPI + 3% depending on income - Plan 5: RPI only
- Postgraduate Loan: RPI + 3%
- Write-off periods vary by plan:
- Plan1: 25 years after first repayment was due (if first loan was after Sept 2006), or at age 65 (if before)
- Plan2: 30 years after first repayment was due
- Plan4: 30 years after first repayment was due
- Plan5: 40 years after first repayment was due
- Postgrad: 30 years after first repayment was due
Disclaimer:
This student loan calculator is for illustrative purposes only and does not constitute financial advice. The calculations are estimates based on current information and assumptions that may change or be inaccurate. Do not make financial decisions based solely on these results.
Student Loan Calc is not responsible for any errors, omissions, or outdated information. Always verify details with official sources like https://www.gov.uk/repaying-your-student-loan and consult a qualified financial advisor before making significant financial decisions. You use this tool at your own risk.