Student Loan Payoff Calculator
✓ Verified for 2026/27Loan Parameters
How We Calculated This
- Enter Outstanding Loan and Income Details: Input your current outstanding student loan balance, your current annual gross salary, and project your expected annual salary growth rate (inflation or promotions). Specify your specific loan plan (Plan 1, Plan 2, Plan 4, Plan 5, or Postgraduate) to establish your threshold and write-off term.
- Project Annual Repayments: Compute your projected repayments for each year of the simulation. Repayments are calculated as 9% of your gross earnings exceeding the threshold for your plan (or 6% for Postgraduate loans). The calculations are performed on an annual basis, assuming salary is earned evenly throughout the year.
- Apply Compound Interest: Calculate and add compound interest to your outstanding loan balance at the end of each year. The student loan compound interest rate varies by plan. Plan 1 and Plan 4 interest rates are tied to the Bank of England base rate or RPI. Plan 2 interest ranges from RPI to RPI + 3% depending on income. Plan 5 interest is fixed to RPI. Postgraduate loan interest is set at RPI + 3%.
- Track Amortization Schedule: Run a year-by-year simulation subtracting your annual repayments and adding annual accrued interest to the balance. The outstanding debt balance is carried forward to the following year as the starting balance for the next iteration.
- Apply Statutory Write-Off Terms: Check the simulation timeline against the write-off rules for your plan. Under the student loan write off terms, any remaining balance is completely cancelled and written off by the Student Loans Company (SLC) after 30 years from when you first became eligible to repay for Plans 1, 2, 4, and PG. For Plan 5 (undergraduate students starting from September 2023 onwards), the write-off term is 40 years.
- Evaluate Early Repayment Viability: Compare the total projected cost of standard repayments (including interest and the final write-off) against a scenario where you make voluntary early repayments. The student loan payoff calculator uk projects whether your income profile is high enough that you will repay the debt in full before the write-off, helping you assess if early repayment saves you money.
Real-World Examples
This scenario simulates the first year of a Plan 2 student loan repayment for a graduate with £45,000 of debt and a starting salary of £50,000, assuming 5% RPI inflation and a matching interest rate of 5%.
Step 1: Starting Balance = £45,000.00; Salary = £50,000.00
Step 2: Calculate Year 1 Repayment (Threshold = £27,295.00 at 9%):
Excess Salary = £50,000.00 - £27,295.00 = £22,705.00
Repayment = £22,705.00 * 0.09 = £2,043.45
Step 3: Calculate Accrued Interest (assuming 5% flat rate based on salary):
Interest = Starting Balance * 5% = £45,000.00 * 0.05 = £2,250.00
Step 4: Compute End of Year Balance:
End Balance = Starting Balance + Interest - Repayment
End Balance = £45,000.00 + £2,250.00 - £2,043.45 = £45,206.55
(Notice that because the interest of £2,250 exceeds the repayment of £2,043.45, the balance grows despite making payments. This is known as negative amortization.)This scenario details the first year for an engineer earning £60,000 with a Plan 1 loan, where repayments significantly outpace interest accrual, leading to rapid debt reduction.
Step 1: Starting Balance = £20,000.00; Salary = £60,000.00
Step 2: Calculate Year 1 Repayment (Threshold = £24,990.00 at 9%):
Excess Salary = £60,000.00 - £24,990.00 = £35,010.00
Repayment = £35,010.00 * 0.09 = £3,150.90
Step 3: Calculate Accrued Interest (assuming Plan 1 rate of 4.3%):
Interest = £20,000.00 * 0.043 = £860.00
Step 4: Compute End of Year Balance:
End Balance = £20,000.00 + £860.00 - £3,150.90 = £17,709.10
(Here, the balance is reduced by £2,290.90 in Year 1. The loan is on track to be fully cleared in under 7 years.)Related Calculators
Frequently Asked Questions & Detailed Tax Guide
How are UK student loan repayments calculated?
UK student loans are repaid through payroll at a flat rate of **9%** on earnings above plan-specific thresholds. The thresholds for the 2026/27 tax year are £24,990 for Plan 1, £27,295 for Plan 2, £31,395 for Plan 4, and £25,000 for Plan 5. Postgraduate loans are repaid at **6%** on earnings above £21,000. Because deductions are calculated on gross pay before income tax is applied, student loans act as an additional marginal tax rate.
Should I make voluntary early repayments to clear my student loan?
Unlike commercial loans, UK student loans are completely written off after 30 or 40 years (depending on your plan). Repayments are strictly linked to your income; if your income drops, repayments stop. Because of this, making early repayments is financially inefficient for basic-rate taxpayers, as they will never repay the balance before it is written off.
Tax Expert Pro-Tips: Interest Rates and High Earners
David Vance, CTA FCA, recommends: “Only high-earning graduates who are mathematically certain to repay the loan balance within 10 to 15 years should consider making voluntary overpayments. For everyone else, that money is better spent in a tax-free ISA or invested in a pension where it can compound over time.”
Legislative References
- Teaching and Higher Education Act 1998 – Statutory framework for student loan repayments.
- Education (Student Loans) (Repayment) Regulations 2009 – Outlines payroll deductions rules.