Should you pay off your student loan? | The Economist

TL;DR

Only high earners benefit from paying off student loans early — lower earners will likely have their debt written off anyway after 30 years.

Key Points

• 1.English graduates repay 9% of earnings above ~£28,000/year for up to 30 years, after which remaining debt is written off regardless of balance.
• 2.Early repayment only makes financial sense if you earn enough to fully repay the loan; otherwise, you're surrendering cash you can't reclaim for debt that would've been cancelled anyway.
• 3.Tuition fees jumped from £3,000 (pre-2012) to £9,000/year (post-2012), meaning recent graduates carry far more debt at higher interest rates than older graduates like the interviewee, who has already paid his off.
• 4.A recent budget froze the repayment threshold for the 2012–2022 cohort for 3 years, meaning inflation-driven wage growth now drags more people into higher repayments than originally expected.
• 5.For lower earners, the system is arguably worse than a true graduate tax — under a pure tax model, higher earners would pay forever, allowing everyone to pay a lower percentage overall.