Should I Pay Off My Student Loan?
Most UK Plan 2 graduates never repay their student loan in full. Treat it as a graduate tax instead of a debt and the early-repayment maths flips on you completely.
UK student loan plans compared, 2025/26
| Plan | Threshold | Repay rate | Write-off |
|---|---|---|---|
| Plan 1 | £24,990 | 9% above | 25 yrs / age 65 |
| Plan 2 | £27,295 | 9% above | 30 years |
| Plan 4 (Scot) | £31,395 | 9% above | 30 years |
| Plan 5 | £25,000 | 9% above | 40 years |
Most Plan 2 borrowers never repay in full. The write-off is the reason early repayment maths so often loses.
Key takeaways
Plan 1 student loans have lower interest rates and are repaid as a percentage of income above a threshold, while Plan 2 loans have higher interest rates and also grow faster.
Consider the opportunity cost of paying off student loans early versus investing; if the stock market returns more than the loan interest rate, investing might be more beneficial.
If the loan interest rate is high or your income is very large, aggressive repayment may be rational; otherwise, treating repayments like a graduate tax and focusing on investing can be more advantageous.
Student loans are written off after a fixed number of years, which means for many borrowers, especially on Plan 2, they act more like a graduate tax than traditional debt.