Calculate Your Repayment

Student Loan

Savings

Enter the expected annual return rate if you invested your money elsewhere, e.g., Cash ISA (~4.6%) or S&P 500 Index Fund (historically ~10%).

How to Use This Calculator

1

Enter Your Loan Details

Select your plan type, course start year and length, current loan balance, and your starting annual salary.

2

Input Your Savings Information

Enter your monthly savings, total available savings, and the expected alternative investment return rate.

3

Check and Analyze Results

Review the comparison between overpaying your loan versus investing, and determine which strategy offers better financial outcomes.

4

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)
  • Plan 2 threshold: £27,295/year (£2,274/month)
  • Plan 5 threshold: £25,000/year (£2,083/month)

Interest rates vary by plan:

  • Plan 1 & 4: Bank of England base rate + 1% (currently2.0%)
  • Plan 2: Variable rate from RPI to RPI+3% based on income (uncapped)
  • Plan 5: RPI (currently 3.0%)

Loans are automatically written off after 25-40 years, depending on your plan.

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 (common for Plan 2 with average salaries)
  • 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 you're close to paying off your loan completely
  • If loan interest rates exceed your potential investment returns

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 have two main options: overpay your student loan or invest.

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 (historically 5-7% annually)
  • Benefit from compounding from an earlier starting point
  • Greater liquidity and flexibility
  • Better outcome if your loan would be written off anyway

Use our calculator to compare both strategies based on your specific situation and assumptions about future returns.

FAQ

Frequently Asked Questions

  • Our calculator models your student loan repayments under different scenarios by:

    • Using the official repayment thresholds and interest rates for your specific loan plan
    • Projecting your future salary based on growth assumptions
    • Comparing overpayment strategies against investing the same money
    • Simulating both approaches over the same time period to determine which offers better financial outcomes

  • It depends on your specific situation. For many graduates, especially those with Plan 2 loans and moderate incomes, investing the money instead of making overpayments can lead to better financial outcomes. Factors to consider include:

    • Your loan plan type and its interest rate
    • Your current and projected future income
    • Whether your loan is likely to be written off
    • The potential return on alternative investments
    • Your personal financial priorities and risk tolerance

    Our calculator helps you make this decision based on your personal circumstances by comparing the financial outcomes of both approaches.

  • The UK has multiple student loan plan types:

    • Plan 1: For students who started before September 2012 in England and Wales, or from Northern Ireland
    • Plan 2: For students who started between September 2012 and July 2023 in England and Wales
    • Plan 4: For all Scottish students
    • Plan 5: For students who started on or after August 2023 in England
    • Postgraduate Loan: For master's and doctoral courses in England and Wales

    The calculator takes your specific plan type into account when performing calculations.

  • Student loans are automatically written off after:

    • Plan 1: 25 years after you were first due to repay, or at age 65 (depending on when you took the loan)
    • Plan 2: 30 years after you were first due to repay
    • Plan 4: 30 years after you were first due to repay
    • Plan 5: 40 years after you were first due to repay
    • Postgraduate Loan: 30 years after you were first due to repay

    Our calculator factors in these write-off periods when analyzing whether making overpayments is financially beneficial.

  • Interest rates vary by loan plan and are updated annually in September based on the Retail Price Index (RPI):

    • Plan 1 & Plan 4: The lower of RPI or the Bank of England base rate plus 1% (currently 6.25%)
    • Plan 2: While studying: RPI plus 3%. After graduation: RPI (for incomes under £27,295) up to RPI plus 3% (for incomes over £49,130)
    • Plan 5: RPI (currently around 7.3%)
    • Postgraduate Loan: RPI plus 3% (currently around 7.3%)

    The calculator uses current interest rates and allows you to model different future interest rate scenarios.

  • Your monthly repayment depends on your income above the threshold:

    • For Plan 1, 2, 4, and 5: You pay 9% of your income above the threshold
    • For Postgraduate Loans: You pay 6% of your income above the threshold

    For example, if you're on Plan 2 earning £2,500 per month, you'd pay 9% of the difference between £2,500 and £2,274, which is £20.34 per month.

    Our calculator simulates your monthly repayments over time based on your expected salary growth.