Student Loan Repayment

How UK student loans actually work

UK student loans are unlike any other form of debt. You don't repay them like a personal loan or mortgage — you pay a percentage of your income above a threshold, regardless of how large the balance is. If your income never reaches the threshold, you repay nothing. If it does, your repayments are capped by your earnings, not your balance.

The Plan 2 paradox: a graduate tax in disguise

For most Plan 2 graduates on average UK incomes, the loan will never be fully repaid. The balance will grow through the early years of a career as interest accrues faster than repayments are made — and after 30 years, whatever remains is written off. In practice, this means Plan 2 functions more like a 30-year graduate income tax than a conventional loan. The total amount repaid is determined almost entirely by your income over three decades, not by the original balance borrowed.

This has an important implication: for most Plan 2 borrowers, overpaying makes no financial sense. If the loan will be written off anyway, any extra voluntary payments simply reduce the amount written off — you're paying money you'd never have owed.

Should you overpay?

The answer depends almost entirely on which plan you're on and your expected career earnings.

• Plan 2: Almost certainly not worth overpaying unless you're a high earner confident of clearing the full balance within 30 years. The write-off safety net makes overpaying a gamble — you sacrifice cash now on a bet you'll definitely clear it.
• Plan 1: Worth considering, especially if you're close to the 65 age write-off. The interest rate is lower, but there's no time-based write-off for most borrowers — the loan persists until age 65 or clearance.
• Plan 5: The 40-year term means even longer exposure. With a relatively low threshold (£25,000), many borrowers will make consistent repayments — whether to clear it early depends on your income trajectory.
• Postgrad: Runs concurrently with undergrad loans. The lower threshold (£21,000) means repayments kick in earlier, and at 6% the rate is slightly lower than undergrad plans.

How the write-off works

After the write-off term (25–40 years depending on plan), whatever balance remains — principal plus accumulated interest — is cancelled completely. You receive no bill, no tax charge and no credit impact. The debt simply ceases to exist. This is a genuine government policy designed to make university financially accessible regardless of what graduates earn.

Plan comparison

What the calculator can't tell you

The biggest unknown is your future income. A modest income growing at 3% per year produces very different results from one that jumps significantly after a career change or promotion. The write-off outcome is highly sensitive to income in the final decade of the term — someone earning well above the threshold in their 40s and 50s may clear the loan entirely; someone who spends years part-time may reach the write-off with a large balance remaining. Run the calculator with a few different income growth assumptions to see the range of outcomes.