Discover how inflation erodes the real cost of your student loan repayments over time, making future payments less burdensome than they appear in nominal terms.
Because student loan repayments are based on current income (not adjusted for inflation), each year's payment becomes less burdensome in real terms.
Threshold: £28,470 | 9% repayment rate
Current annual repayment: £588
UK average: 3-5% per year (includes inflation)
Bank of England target: 2% | 20-year average: ~2.5%
Real Income Growth
1.0%
Nominal growth (4.0%) minus inflation (3.0%)
Maximum: 30 years (loan write-off period)
Total Nominal Payments
£42,555
What you'll actually pay
Real Value (Today's £)
£29,029
Inflation-adjusted cost
Purchasing Power Saved
£13,526
31.8% benefit from inflation
Over 20 years, you'll pay £42,555 in nominal terms. However, due to inflation, the real cost in today's money is only £29,029.
Inflation saves you £13,526 in real purchasing power (31.8% of total payments). This happens because your repayments are calculated on current salary thresholds, not adjusted for inflation.
By year 20, each pound you pay will only have 55% of today's purchasing power, making the debt burden significantly lighter.
Showing first 10 years of 20-year projection
| Year | Nominal Payment | Real Value | Purchasing Power | Saved |
|---|---|---|---|---|
| 1 | £588 | £571 | 97.1% | £17 |
| 2 | £714 | £673 | 94.3% | £41 |
| 3 | £845 | £773 | 91.5% | £72 |
| 4 | £981 | £872 | 88.8% | £109 |
| 5 | £1,123 | £968 | 86.3% | £154 |
| 6 | £1,270 | £1,064 | 83.7% | £206 |
| 7 | £1,423 | £1,157 | 81.3% | £266 |
| 8 | £1,583 | £1,250 | 78.9% | £333 |
| 9 | £1,749 | £1,340 | 76.6% | £408 |
| 10 | £1,921 | £1,430 | 74.4% | £492 |
| Total | £42,555 | £29,029 | 68.2% | £13,526 |
Showing first 10 years. Full projection includes 20 years.
Repayment thresholds historically increase with inflation or earnings growth. When frozen, real repayment burdens increase. When indexed, inflation helps by keeping real burdens stable.
Because repayments are 9% of income above thresholds (not based on balance), each year's payment becomes relatively cheaper as inflation erodes its real value.
With 25-40 year repayment periods, compound inflation significantly reduces the real burden. A 3% inflation rate means money loses half its value in 23 years.
Historically, UK wage growth (3-4%) exceeds inflation (2-3%), meaning real incomes rise while loan repayments stay fixed as a percentage of income.
Most borrowers won't fully repay before write-off. Inflation reduces the real value of what's paid without affecting the write-off timeline.
Unlike mortgages where debt is fixed, student loan balances grow with interest but repayments are based only on current income, creating asymmetric inflation benefit.
Inflation is often viewed negatively, but for student loan borrowers, it provides a significant hidden benefit by eroding the real cost of debt repayments over time. This calculator helps visualize how inflation reduces the true burden of student loans.
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