How to make a student loan overpayment (and what to know first)
If you’ve decided an overpayment is worth making, the process is simple. The more important part is knowing what it does and doesn’t do.
How to pay
You can make extra repayments:
- Through your online account with a debit card, or by setting up a Direct Debit
- By bank transfer or standing order from a UK bank account
- By cheque, which takes longer to process (though it’s backdated so you don’t build up extra interest because of the delay)
- From overseas through your online account, or by international bank transfer
Always use your customer reference number (CRN) as the payment reference. GOV.UK warns that a payment won’t be applied to your student loan account without it. Get the bank details from GOV.UK or your online account rather than from anywhere else, and be wary of anyone who contacts you unexpectedly about your loan.
Choose where it goes
If you have more than one plan, you can choose how an extra repayment is applied: to reduce the total balance, or the balance of a specific plan. If you don’t choose, the Student Loans Company (SLC) decides for you, and for loans in repayment it applies the money to the balance with the highest interest rate first. See what if you have more than one student loan plan?
What an overpayment does
- It reduces your balance, so less interest builds up from then on.
- It can shorten the time until the loan is cleared, if you’re on course to repay in full.
- There’s no penalty for paying some or all of your loan off early.
What it doesn’t do
- It doesn’t reduce your monthly deduction. Compulsory repayments depend on your income, not your balance, so the same percentage still comes out of your pay until the loan is cleared. Extra payments bring the finish date forward instead.
- It doesn’t change your write-off date. That is fixed by when you first became liable to repay.
- It can’t be refunded. GOV.UK is explicit that you can’t get a refund of extra repayments you make.
GOV.UK also points out that you might not benefit from extra repayments because your loan will be written off at the end of its term, so check the date first, and speak to a financial adviser if you’re unsure.
Paying it off in full
Ask SLC for a settlement amount and a settlement date, rather than paying the balance from your last statement, because interest is added to your balance and the exact amount owed changes. See paying off your student loan: settlement figures and Direct Debit.
Questions to ask yourself first
- Would I actually repay this loan in full anyway? If not, an overpayment mostly moves cancelled money early. See should I overpay my student loan?
- Do I have an emergency fund? You can’t get an overpayment back if your situation changes.
- Is there a better use of the money? A workplace pension match usually is. See overpay your student loan or invest?
- Do I know my plan and balance? Log in and check them first.
The calculator will show what an overpayment would do to your total cost and finish date on the figures you enter.
Source: GOV.UK, Make extra repayments.