Should I Overpay My Student Loan?
A comprehensive guide to help you decide whether overpaying your student loan makes financial sense, with worked examples, plan comparisons, and alternatives to consider.
💡The Quick Answer
For most borrowers: No, overpaying is NOT worth it. This is especially true if you're on Plan 2 or Plan 5 with a large balance. Most people won't repay their loan in full before it's written off, so overpayments are effectively "lost money."
However, there are specific situations where overpaying CAN make sense, usually involving high earners with smaller balances. Read on to find out which category you fall into.
Most Won't Repay
~80%
of Plan 2 borrowers
Average Balance
£45k
at graduation
Break-even (Starting) Salary
~£50k
to repay in full (Assuming 4% Wage Growth on Plan 2)
Interest Rate
6.2%
Plan 2 (2025/26)
Understanding the Key Concept
UK student loans are NOT like normal debt. They're more like a "graduate tax" that you pay for a fixed period, then any remaining balance is forgiven. This fundamentally changes whether overpaying makes sense.
ℹ️The Write-Off Principle
For many borrowers, loans are written off before they’re fully repaid. If that’s likely for you, voluntary overpayments don’t help, they simply cost you extra. Overpay only when you’re confident that it will shorten your repayment period enough to save you more in future deductions than the amount you’re paying upfront.
| Plan | Write-off Period | Likely to Repay in Full? |
|---|---|---|
| Plan 1 | 25 years after April after graduation | Higher chance (lower threshold historically) |
| Plan 2 | 30 years after April after graduation | Only ~20% will repay |
| Plan 4 | 30 years (or age 65) | Moderate chance |
| Plan 5 | 40 years after April after graduation | Very few will repay |
| Postgraduate | 30 years | Only high earners |
The Decision Framework
Before you consider overpaying, work through this checklist in order. Overpaying your student loan should be one of the LAST things you do with spare money:
Emergency Fund
Do you have 3-6 months of expenses saved? If not, build this first. Student loan interest is meaningless if you end up on a 25% APR credit card.
High-Interest Debt
Credit cards, overdrafts, car finance, anything over ~5% APR should be cleared before student loans.
Employer Pension Match
If your employer matches pension contributions, this is FREE MONEY. A 5% match is an instant 100% return, no investment beats this.
Lifetime ISA (if saving for a house)
The 25% government bonus is guaranteed. Max out £4,000/year if you're saving for your first home.
Additional Pension (if tax-efficient)
Higher-rate taxpayers get 40% tax relief on pension contributions. That's hard to beat.
Finally: Consider Student Loan Overpayment
Only now, if you have money left over AND you expect to repay your loan in full, should you consider overpaying.
Will You Actually Repay Your Loan in Full?
This is the crucial question. If you won't repay in full anyway, overpaying makes no sense mathematically. Use these rough guidelines:
💰Likely to Repay in Full
- Expecting career earnings averaging £50k+ (Plan 2)
- Professional career path (medicine, law, finance, tech)
- Relatively small loan (under £30k)
- Already a high earner early in career
- Plan 1 borrower (lower threshold, shorter write-off)
⚡Unlikely to Repay in Full
- Large loan balance (£50k+)
- Average salary expectations (£25k-£40k)
- Plan 5 borrower (40-year term)
- Career breaks expected (parenting, caring)
- Public sector or creative industry careers
📝Use the Calculator
Don't guess, instead model your actual situation. Our overpayment calculator shows exactly how overpayments would affect your total repayments based on your salary, loan size, and expected career progression.
Worked Examples: When Overpaying Helps (and Hurts)
💡Important: Examples are illustrative
These worked examples are illustrative only. They show the principle, not a precise prediction. Actual outcomes in each example can vary widely depending on wage growth, career breaks, interest rate changes, and other personal circumstances. Use the calculator to model your specific situation.
📝 Example 1: High Earner, Overpaying Makes Sense
Sarah: Plan 2, £40,000 balance, £65,000 salary, age 28
Without overpaying:
- Monthly payment: £274
- Time to repay: 18 years
- Total repaid: £62,400
- Interest paid: £22,400
With £200/month overpayment:
- Monthly total: £474
- Time to repay: 9 years
- Total repaid: £51,200
- Interest paid: £11,200
✓ Saves £11,200 in interest by overpaying
📝 Example 2: Average Earner, Overpaying Wastes Money
Tom: Plan 2, £50,000 balance, £32,000 salary, age 22
Without overpaying:
- Monthly payment: £26
- Balance at write-off (30 years): £78,000
- Total repaid: £9,360
- Written off: £78,000
With £200/month overpayment:
- Monthly total: £226
- Balance at write-off: £42,000
- Total repaid: £81,360
- Written off: £42,000
✗ Paid £72,000 MORE for no benefit, loan still written off!
📝 Example 3: Borderline Case, Needs Calculation
Emma: Plan 2, £45,000 balance, £45,000 salary, age 25
Emma is in the "grey zone", she might repay in full, or might not. It depends on:
- Future salary growth
- Career breaks
- Interest rate changes
→ Use the calculator to model different scenarios
When Overpaying Makes Sense
✓ Consider Overpaying If:
- You're confident you'll repay in full before write-off
- You're a high earner (£50k+ sustained)
- You have a relatively small balance (<£30k)
- You've ticked all other boxes (pension, emergency fund, etc.)
- You strongly value being debt-free psychologically
- You're on Plan 1 (shorter write-off, lower threshold)
- You have a lump sum from inheritance/bonus you want to use
✗ Don't Overpay If:
- You have high-interest debt elsewhere
- You're not maximising employer pension match
- You don't have an emergency fund
- Your loan will likely be written off anyway
- You're on Plan 5 (40-year term)
- You expect career breaks or lower earning periods
- You could invest the money at higher returns
Student Loan Overpayment vs Pension Contributions
This is the most common comparison. Here's a detailed breakdown:
| Factor | Student Loan Overpayment | Pension Contribution |
|---|---|---|
| Guaranteed return | Saves interest (if you'd repay) | Employer match (often 3-5% free money) |
| Tax relief | None | 20-40% tax relief on contributions |
| Access to money | Gone forever | Age 55+ (57 from 2028) |
| Risk | No market risk | Market risk (but long-term growth likely) |
| If you die | Loan written off, overpayments lost | Can pass to beneficiaries |
| Best for | High earners who'll repay in full | Almost everyone |
✅The Pension Almost Always Wins
Even ignoring employer matching, a 20% taxpayer gets instant 25% uplift on pension contributions (£80 becomes £100). Higher-rate taxpayers get even more. The student loan would need to charge over 20% interest for overpaying to beat basic pension contributions.
Plan-Specific Advice
📊Plan 1 Borrowers
Plan 1 has the best case for overpaying due to:
- Lower threshold (£26,065) means more of your salary goes to repayments
- Shorter write-off period (25 years)
- Generally smaller loan balances (pre-£9k fees)
- Many Plan 1 borrowers WILL repay in full
Verdict: Worth considering if you're a higher earner with 10+ years left on your loan.
🎓Plan 2 Borrowers
Plan 2 is more nuanced:
- Higher threshold (£28,470) means lower monthly payments
- 30-year write-off period
- Larger balances (£40-60k typical)
- Only ~20% expected to repay in full
Verdict: Only consider if you're in the top 20% of earners (sustained £50k+ career).
⚡Plan 5 Borrowers (2023+)
Plan 5 has the weakest case for overpaying:
- 40-year repayment window
- Lower interest rate (RPI only)
- Even high earners may not repay in full
- Very few borrowers expected to repay
Verdict: Almost never worth overpaying. Focus on pensions and ISAs instead.
🎯Postgraduate Loan Borrowers
Postgraduate loans have additional considerations:
- 6% repayment rate ON TOP of undergraduate loan
- Same 30-year write-off as Plan 2
- If you have both, you're paying 15% above thresholds
Verdict: Combined UG+PG loans mean higher effective "tax", but also higher chance of write-off.
Model Your Overpayment Scenario
See exactly how overpayments would affect your total repayments, interest paid, and time to clear your loan.
Key Takeaways
Most UK graduates should NOT overpay their student loans, the money is better used elsewhere
Only consider overpaying if you're confident you'll repay in full before write-off
Always prioritise: emergency fund → high-interest debt → pension matching → then maybe student loan
Plan 1 borrowers have the strongest case for overpaying; Plan 5 borrowers almost never should
Pension contributions usually beat student loan overpayments due to tax relief and employer matching
Use the calculator to model your specific situation before making a decision
Related Guides
Pension vs Student Loan Overpayments
Detailed comparison of where to put your extra money
Learn more →Interest Rates Explained
Understanding how student loan interest works
Learn more →High Earners & Postgrad Plan 2
Special considerations for double debt situations
Learn more →Salary Sacrifice & Student Loans
How salary sacrifice can reduce your repayments
Learn more →Overpayment Calculator
CalculatorModel different overpayment scenarios
Learn more →Total Cost Calculator
CalculatorSee your lifetime repayment projections
Learn more →