On average, a UK graduate comes out of university with £40,000 to £60,000 of outstanding debt.

Some will pay back a fraction of this, whilst others could pay back more than double. On this page, we'll go through detailed examples with the aim of equipping you with all the information you need in order to make an informed decision around the repayment of your UK student loan.

How Much Will You Pay Back?

Last updated: 6th March 2021

How much you will end up paying back is probably the most important question anyone who has taken a loan out has. That's closely followed by the question of "Should I try to pay it off?" In this section, we try our best to answer both of those questions.

Your UK student loan is an income-contingent repayment loan which means the repayment of it is directly tied to your income.

Only when you earn above the repayment threshold do you make contributions towards the repayment of your student loan. If you were earning below the repayment threshold for the rest of your working life, then you'd pay back £0, irrespective of how much you owe. You pay 9% of everything you earn over the repayment threshold.

Repayments start the April after you graduate. Your loan is written off after 25 and 30 years for Plan 1 and Plan 2 (or Plan 4 / Postgraduate) loans respectively. Your loan is also written off in the case of death or if you become permanently unfit to work.

To illustrate the scale of repayments based on income, let's look at the scale of repayments through five different income groups:

Living Wage and Below Earners
An income which is at or below the UK living wage, which is under the repayment threshold for most of their working life
(1-24th percentiles of UK earners)
Low Earners
An income around or just over the repayment threshold for most of their working life
(25-49th percentiles of UK earners)
Mid Earners
An income which is a good chunk above the repayment threshold and with above inflation pay rises for most of their working life
(50-79th percentiles of UK earners)
High Earners
An income which is a big chunk above the repayment threshold and with above inflation pay rises and/or decently sized pay rises for most of their working life
(80-94th percentiles of UK earners)
Top Earners
An income which is a huge chunk above the repayment threshold and with far above inflation pay rises and/or big pay rises for most of their working life
(95-99th percentiles of UK earners)

Let's take one person from each of these groups and assume the following:

  • They all have a Plan 2 loan
  • They all graduated in 2020
  • They all have exactly £50,000 of outstanding debt when they start making repayments
  • They all start repayments in April 2021

If we graph out how much each person pays back:

The orange line marks the £50,000 of debt at the start of repayments. Everything above the orange line is interest paid off.

As you can see, the more you earn, the more you pay back — but only upto a limit. When you are a top earner, you pay less than high earners and you start paying off your loan instead of having it written off.

Year by Year

Let's take a look at a year-by-year breakdown for each person in terms of the mandatory payments they make and the interest applied in each year.

You can see that Living Wage and Below earners only really start making any payments towards the end of their repayment period:

Living Wage and Below Earner
30
years
Till their loan is written off
£2,811.75
paid in total
Which is

£47,188.25

less than the current outstanding debt on this loan

Low earners start making payments much earlier on, and so end up paying back a lot more than the Living Wage and Below earners, but still not the full loan amount they initially took out:

Low Earner
30
years
Till their loan is written off
£20,246.99
paid in total
Which is

£29,753.01

less than the current outstanding debt on this loan

Mid earners make repayments from the get-go and end up paying back the amount they initially took out. They can also end up paying back anywhere between 0-50% more of what they originally took out (depends on whether you find yourself on the lower or higher end of the Mid earner bracket). They almost never pay more than the interest applied in any given year which is why they continue making payments until the write-off date:

Mid Earner
30
years
Till their loan is written off
£70,585.05
paid in total
Which is

£20,585.05

more than the current outstanding debt on this loan

High earners (the 80-95th percentile of earners) are the people who end up paying back the most. Their income isn't significantly higher than the interest applied each year until much later on in the repayment period. As a result, the debt keeps growing despite the high amount of repayments they have to make each year. These people would benefit the most from making extra contributions and trying to pay down the interest, as it could save them a signficant amount of money:

High Earner
27
years
Till their loan is paid off
£122,059.79
paid in total
Which is

£72,059.79

more than the current outstanding debt on this loan

Top earners (top 5% in the UK) pay more in mandatory payments than the interest applied from the get-go and always end up paying off their loan. They can also benefit from making extra contributions towards their loan with the aim of paying less interest:

Top Earner
12
years
Till their loan is paid off
£71,596.7
paid in total
Which is

£21,596.7

more than the current outstanding debt on this loan

Should You Make Extra Payments?

If you are a high graduate earner and are likely to be a high earner for most of your working life, then making extra payments towards your loan can make a lot of financial sense. As a high earner, you might eventually pay off your loan, but with extra payments you can reduce the amount of excess interest you pay. Of course, you have to be pragmatic about this and not make life difficult for yourself — if you really want to make extra payments, do so within your means. Remember, a UK student loan is different to a normal form of debt. The money you might put towards extra payments can be used for many other things, and extra payments might not make a difference to your debt at the end of the repayment period, as we will now show.

Year by Year with Extra Payments

Continuing with the example in the above section, let's now take a look at a year-by-year breakdown for the same people with the exact same repayment start dates and income levels, but now let's also make them contribute extra monthly payments (with respect to their income), with the aim of reducing the interest they pay and paying off their loan. Beneath each graph you can see how much extra each person pays and when.

There is almost no point in making any extra payments if you are a Living Wage and Below earner as your loan continues accumulating significant interest. Unless you pay off the full amount, that money is better spent elsewhere.

Living Wage and Below Earner
30
years
Till their loan is written off
£20,474.08
paid in total
Which is

£29,525.92

less than the current outstanding debt on this loan

Much like the Living Wage and Below earner, there isn't much point for a Low earner to make any extra payments.

Low Earner
30
years
Till their loan is written off
£41,848.62
paid in total
Which is

£8,151.38

less than the current outstanding debt on this loan

Depending on whether a Mid earner is on the lower or higher end of the Mid earners bracket, making extra payments can make a difference to the total amount they pay throughout the repayment period but not necessarily by much. However, with these extra payments they are on track to have their loan paid off by the end of the repayment period.

Mid Earner
29
years
Till their loan is paid off
£87,118.09
paid in total
Which is

£37,118.09

more than the current outstanding debt on this loan

High earners benefit the most from making extra payments, as they reduce the excess interest they pay on their loan significantly.

High Earner
15
years
Till their loan is paid off
£70,564.03
paid in total
Which is

£20,564.03

more than the current outstanding debt on this loan

Top earners also benefit from making extra payments as again, they reduce the excess interest they pay on their loan.

Top Earner
7
years
Till their loan is paid off
£59,828.64
paid in total
Which is

£9,828.64

more than the current outstanding debt on this loan

As you can see, the more you earn, the more extra payments benefit you. However, even if you are not a high earner now, you might become one in a few years time. The above examples show the outcome of different earners generally, but every person's case will be different. Spend some time figuring out whether it will make financial sense for you to start paying extra towards your loan or not. With that being said, before you decide to start making extra payments to try and rid yourself of this debt, make sure that the money can't be better used elsewhere. There is an opportunity cost to doing this. If you're putting say £300 a month towards your loan for a few years to get rid of it earlier, how much money does that save you in the long run? It might be the case that this way you avoid an extra 5-10 years later on in life of still having to pay a few hundred a month towards your loan, but maybe you don't mind that. The money could be a lot more useful to you now than the cost of paying a few hundred towards your loan when you're in your 50s. Most importantly, once you have made the decision to start paying off your loan, you need to commit, else it's just money thrown away. Always seek advice from a professional when it comes to making financial decisions.

Paying Your Loan Off

Regardless of your income level (current or future), you might want to pay off your loan for religious or other reasons. Whatever the case, the most important factor in paying off an interest-bearing loan is keeping the interest under control. For UK student loans the, interest is calculated daily and applied to your balance each month. This is known as compound interest.

For example, if you had a Plan 2 loan with £50,000 of outstanding debt with an interest rate of 2.6% base RPI plus upto 3% on top depending on how much you earn, anywhere between £118 and £289 of interest is applied per month, depending on whether the minimum (2.6%) or maximum (5.6%) rate is applied.

It's very important to remember that wanting to pay off your loan doesn't mean you'd need to get your loan down to £0 immediately. Because the interest is percentage based (the more debt you have the more interest will be applied monthly), getting your debt down to a level where the interest is manageable is the biggest step towards paying off your loan. This often means that in the first few years you pay much more aggressively with large monthly contributions. Then, in the remaining years until your loan is paid off, you can make smaller monthly contributions.