Which student loan plan are you on?
The Student Loans Company runs different plans depending on when and where you studied. Plan 1 (England/Wales pre-2012, Northern Ireland) repays 9% over £24,990, written off after 25 years. Plan 2 (England/Wales 2012-2023) repays 9% over £27,295, written off after 30 years. Plan 4 (Scotland) repays 9% over £31,395. Plan 5 (England, started Aug 2023 onward) repays 9% over £25,000 and is written off after 40 years. Postgraduate Loans repay 6% over £21,000 on top of any undergraduate plan.
A Plan 2 graduate earning £45,000 repays 9% on the slice above £27,295, that is £1,593 a year (about £133 a month) deducted via PAYE. If they expect their salary to stay modest and the balance to be written off in year 30, overpaying voluntarily is throwing money away. If they expect a high-earning career, the loan behaves more like a real debt at RPI-linked interest, and overpaying can save thousands.
Treating the loan like a normal debt and panicking. For most graduates it functions as a graduate tax of 9% above the threshold, with anything unpaid written off. Overpaying only makes sense if you will repay the full balance before write-off.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.