Investment vs Student Loan Overpayment Calculator
Compare whether you're better off investing your extra money or making voluntary student loan repayments.
Should You Invest or Overpay Your Student Loan?
Different loan plans have different interest rates
Your income affects interest rates for some loan plans
This helps determine your loan write-off date
Amount you could put towards investments or loan overpayments
A typical stock market return might be 5-7% annually over the long term
Your Results
Complete the form and click "Calculate Comparison" to see whether investing or loan overpayments is likely to be more financially beneficial for you.
Investment Option
£24,789
Projected value after 10 years
Loan Overpayment Option
£18,432
Interest savings over 10 years
How This Calculator Works
Our investment vs overpayment calculator helps you make an informed decision about whether to make extra student loan repayments or invest your money instead. This is a crucial financial decision that depends on several factors:
Key Factors in the Calculation
- Loan interest rate vs investment returns: If your expected investment return (e.g., 5-7% from the stock market) exceeds your student loan interest rate, investing may be more financially beneficial.
- Loan write-off period: If you're unlikely to repay your loan before it's written off (25-40 years after graduation, depending on your plan), making extra payments might not make financial sense.
- Tax implications: Investment returns may be subject to tax (though ISAs can protect returns), while student loan interest isn't tax-deductible in the UK.
- Risk tolerance: Investments carry risk, while paying down debt offers a guaranteed return equal to the interest rate.
When Overpaying Your Loan Makes Sense
- You have a high interest rate (e.g., Postgraduate Loan at RPI + 3%)
- You're likely to pay off your loan in full before the write-off date
- You're a high earner with a Plan 2 loan (where interest can reach RPI + 3%)
- You prefer the certainty of debt reduction over investment risk
When Investing Makes Sense
- Your loan has a low interest rate (e.g., Plan 1 or Plan 4)
- You're unlikely to repay your loan in full before it's written off
- You're comfortable with investment risk and have a long time horizon
- You can invest tax-efficiently (e.g., through an ISA)
Note that this calculator provides general guidance based on common financial principles. Your personal circumstances, risk tolerance, and financial goals should ultimately guide your decision.