How the Repay vs Invest Comparison Works

What the Calculator Compares

The calculator models two scenarios and compares their projected outcomes at your chosen retirement date:

• Overpay strategy: You make an overpayment (lump sum or regular monthly amount) against your student loan. This reduces the loan balance faster, saving on interest and potentially paying it off before the write-off date. Any cashflow freed up after early repayment is then invested.
• Invest strategy: Instead of overpaying, you invest the same amount in an ISA, pension, SIPP, salary sacrifice arrangement, or General Investment Account (GIA). Your loan continues on its standard repayment schedule.

The comparison shows the projected pot value at retirement for each strategy, under the salary growth, investment return, and inflation assumptions you choose.

The Opportunity Cost Concept

Overpaying a student loan has a financial cost: the money used to reduce the loan balance could instead have been invested and compounding over time. This foregone growth is the opportunity cost.

Whether the interest saved by overpaying exceeds the investment growth you forgo depends primarily on:

• Your loan's effective interest rate versus your assumed investment return
• Whether you are on track to repay the loan in full or whether it will be written off
• How many years remain before the write-off date
• How much freed cashflow you reinvest after early payoff

For graduates projected to reach the write-off date with a remaining balance, overpaying may produce a lower projected outcome than investing — because interest saved on a balance that would have been cancelled has limited value. For graduates projected to repay in full, the calculation is closer. This calculator illustrates these scenarios under your assumptions.

Model Mechanics

Assumptions and Limitations

All projections in this tool are estimates. The following limitations apply:

• Salary grows at a steady annual rate — the model does not simulate promotions, career breaks beyond the configurable break-from-work feature, redundancy, or self-employment income variation.
• Investment returns are applied as a constant annual rate. The model does not simulate market volatility, sequence-of-returns risk, or drawdown strategies.
• ISA annual allowances (currently £20,000/year) and pension lifetime allowances are not modelled.
• Future changes to tax legislation, student loan thresholds, or interest rate formulas beyond what is configurable are not accounted for.
• The model assumes all freed cashflow after early loan repayment is invested at the configured percentage. In practice, spending habits may differ.

These are deliberate simplifications to keep the model tractable and transparent. The purpose of the tool is to illustrate relative differences between scenarios, not to predict exact outcomes.