Pay off your student loan early?


As more and more of us graduate in England and Wales we are faced with the burden of having to repay our student loans, especially with the Labour Party not winning the last General Election...

Student loans are likely to be one of the cheapest loans we’ll ever get but the sharp interest rate rise to 6.1% in September may cause you to consider clearing your loan as soon as possible. We look at whether if it’s worth paying off your student loan early.

 Why pay off your student loan early?

Repaying your student loan early will speed up the process so that you have one less debt to worry about. It also means you end up paying less interest in the long run.

As student loans do not come with penalties for early repayment like a mortgage for instance, there is no harm in clearing the debt early.

Find out how much you owe on the Student Loans Company website

How much do you repay?

Started uni before 1st September 2012?

  • You will start repaying student loan from April after you finish your course.
  • If you earn more than £17,495 9% of what you earn above this will go towards paying off your student loan.
  • Current interest rate is 1.25%.


Started uni after 1st September 2012?

  • You start paying the loan the April 4 years after the start of your course, or the April after you finish or leave your course.
  • If you earn more than £21,000 (or £1,750 a month or £404 a week) 9% of what you earn above this go towards paying off your loan.
  • Current interest rates depend on your circumstances. Find out more on Student Loans Company website, interest section

Repayments are automatically deducted from your pay if you work for an employer.

 Have other debts?

If you have debts in addition to your student loan such as an outstanding credit card balance or car loan, it could be worth prioritising these instead of overpaying on your student loan if the interest rates on these loans are higher.

Student loan repayments come out of your salary and you only have to make them if you earn above the thresholds stated. There is no chance of failing behind on them like other loan types.

However, if your student loan is your only outstanding debt and you have some cash to spare, making overpayment on your loan may not be such a bad idea. You may also want to consider putting the money into a high interest savings account and build on your savings for later purchases like a deposit for a house.

 How do you make overpayments?

Below are a number of ways you can make overpayments on you loan:

  1. Pay an additional amount online to the Student Loans Company with a credit or debit card. A minimum of £5 applies, and you will be charged 1.5% extra if you pay by credit card.
  2. Send a cheque or postal order to the Student Loans Company, making sure to write your Student Support Number of the back.
  3. Set up a direct debit or standing order by contacting a Student Loans Company adviser.

 Will your debt ever be cleared?

All student loan debts will be wiped at some point later:

  • If you took out the loan before 2005/06 academic year, your loan will be wiped when you reach 65.
  • If you took out the loan in or after the 2006/07 academic year it will be cancelled 25 years after you became eligible to pay it.
  • If you took out the loan after the 1st September 2012 the debt will usually be written off 30 years after you became eligible to pay it back.
  • All student debts will be wiped upon death or if you become permanently unfit to work.


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