How does the investment-only strategy work?

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.

How does the overpayment strategy work?

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.

How does the student loan calculator work?

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.

When do I start repaying my student loan?

You'll start repaying when your income is over the threshold for your plan type. The earliest you'll start is:

The April after you leave your course
The April 4 years after your course started (if studying part-time and course is longer than 4 years)
April 2026 if you're on Plan 5

Your repayments automatically stop if you stop working or your income goes below the threshold.

What are the repayment thresholds?

Current annual repayment thresholds:

Plan1: £26,065
Plan2: £28,470
Plan4: £32,745
Plan5: £25,000
Postgrad: £21,000

You repay 9% of income above the threshold for Plans 1, 2, 4, and 5, or 6% for Postgraduate Loans.

How is interest calculated on student loans?

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%

Interest is charged from the day of your first payment until the loan is repaid or cancelled.

When does my student loan get written off?

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

What is the interest rate cap?

The Department for Education monitors comparable market rates using monthly data published by the Bank of England.

If the average comparable market rate is lower than the interest rate you're being charged on your loan, we'll apply a temporary interest rate cap, so you're not disadvantaged. The comparable market rate is reviewed monthly and a change to the interest rate cap made if necessary.

Which repayment plan am I on?

Your plan depends on when and where you studied:

Plan 5: Started course on/after August 2023 (England)
Plan 2: Started course 2012-2023 (England/Wales)
Plan 1: Started course before 2012 (England/Wales) or anytime (Northern Ireland)
Plan 4: All Scottish students

Postgraduate Loan plans apply to master's or doctoral courses in England/Wales.

What happens if I have multiple student loans?

If you have multiple loans:

You'll repay 9% of income above the lowest threshold of your plan types
If you also have a Postgraduate Loan, you'll pay an additional 6% above its threshold
You'll only make a single repayment for multiple undergraduate loans
Each loan keeps its original interest rate and write-off terms

What happens if I have multiple jobs?

If you have multiple jobs, repayments are only taken from jobs where your income is above the threshold, not your combined income. For example:

If you earn £1,000 and £800 monthly from two jobs (Plan 1), you won't make repayments as neither salary is above the £2,172 monthly threshold
If you earn £2,400 and £500 monthly (Plan 2), you'll only make repayments on the £2,400 salary as it's above the threshold

How is interest calculated during my studies?

Interest rates vary by plan type and study status:

Plan 2: While studying, you're charged RPI + 3%. After studying, it varies from RPI to RPI + 3% based on income
Plan 5: RPI only
Plan 1 & 4: Lower of RPI or Bank of England base rate + 1%
Postgraduate Loan: RPI + 3%

Interest starts accumulating from your first payment and continues until the loan is repaid or cancelled.

Can I get a refund if I overpay?

Yes, in certain circumstances:

If your annual income ends up below the threshold, despite making repayments during the year (e.g., due to bonuses or overtime)
If you were on the wrong repayment plan and paid too much
There's no penalty for voluntary overpayments, but these cannot be refunded

What happens if I can't work due to illness or disability?

The Student Loans Company may cancel your loan if you claim certain disability benefits. You'll need to provide evidence (such as a letter from the benefits agency) and your Customer Reference Number.

What happens to my student loan if I die?

The Student Loans Company will cancel the loan. Your family or estate administrators need to provide evidence (like an original death certificate) along with your Customer Reference Number.

Student Loan Calculator FAQ