Should I overpay my Plan 5 student loan?
Plan 5 is the newest plan, for English undergraduates who started on or after 1 August 2023. Its terms differ from Plan 2, and that changes how you should think about overpaying.
What’s specific to Plan 5
- Repayments: 9% of income above £25,000, a lower threshold than Plan 2 or Plan 1.
- Interest: 4.1%, the same for everyone whatever they earn.
- Write-off: 40 years after the April you first became liable to repay.
If you’re comparing it with the older plan, see Plan 2 vs Plan 5.
Why the answer is different from Plan 2
The 40 years write-off period gives a balance far longer to be repaid. Combined with the lower threshold, that means many more Plan 5 borrowers are likely to repay their loan in full, especially if their earnings grow steadily over a long career.
That matters because of the point at the heart of should I overpay my student loan?: overpaying only makes sense if the loan would otherwise be repaid in full. Where that’s likely, the interest is a real cost and overpaying can save some of it.
The comparison to make
If you would repay in full, overpaying earns a return equal to the interest rate, 4.1% at the rate used here, with no risk. The alternative is to invest the same money for a return that isn’t guaranteed and could be higher or lower, or could be a loss.
- Overpaying is certain but limited to the interest rate, and it can’t be reversed.
- Investing may earn more over a long time but isn’t guaranteed, and you’d need to actually invest the money.
Which is better depends on your time horizon, your appetite for risk and the return you assume, which is why the calculator lets you set the investment return yourself and see the results across a range.
Cases where Plan 5 borrowers might not overpay
- A low or interrupted earnings path, where a large balance could still be cancelled.
- No emergency savings. A lump sum can’t be taken back.
- A workplace pension match you aren’t using, which beats either option. See overpay your student loan or invest?
Because it’s new, some caution
Plan 5 borrowers have not yet been repaying for long, and the rules could change in future. Any decision you make now is based on today’s terms. Check gov.uk for the current position before making a large payment.
Figures are those used on this site for 2026–27. This is general information, not financial advice. See the disclaimer.