If you have a student loan or are thinking of taking one out, then you may worry about what the best way is to pay it off. It can feel like a huge amount of money to owe and you may really worry about having that debt and the effect that it might have on you in the future as well. However, it is worth making sure that you understand how the loans work before you worry too much about how to pay it off. This applies to the current UK student loan system, not the previous one.
A student loan will not need to be paid off until you are earning above a certain threshold of money. This amount is reviewed by the government yearly and will usually increase with inflation, although that does not always happen. This means that if you earn below a certain amount of money, you will not have to make repayments. The loan is written off after thirty years, meaning whether you have paid most of it off or none of it, you will have the debt cleared. Once you do need to make repayments, when you earn above the threshold, you will have the money automatically taken out of your salary as PAYE. If you are self-employed you will be able to put the details in to your tax return and sort it out that way. This means that you do not repay it in the same way as with a conventional loan. Therefore the way that the loan is repaid is very simple and you need not worry about making the repayments as they will come out before you are paid, so you will not even have to budget for them.
However, some people like the idea of being able to clear their debt early. This can be very sensible with most types of debt as it will mean that you will end up paying less interest and in the long term you can make significant savings. However, if you do this with a student loan, you could end up paying out a lot more than you actually need to. It may be that you will not be paid that much when you first graduate or you have times when you are out of work so you end up not having to pay back the full loan amount anyway. It is likely that most people will be in this situation with around three quarters f graduates not repaying the whole of their loan. This means that they pay back none of the interest at all and usually not even all of the outstanding balance either. Therefore clearing it early could be a mistake as you could end up paying more than you actually need to. Some people may feel that it is morally right to pay it all back as they got the benefit of the course, but others may just be happy to pay back what they have to pay back. Most people would feel that as they only have to pay back what the government asks for then that is all they will pay back as it is what most people do.
So if you are worried about trying to pay back your student loan, then you should not be. The payments will be taken automatically and so you will not need to worry about finding the money to pay them. The payments are also relatively small, even for high earners and so they should not have a significant impact on your standard of living. The loan also does not appear on your credit record so will have no impact on your ability to borrow money in the future, should you need to. This means that you should try to just let the loan take care of itself. Unless you are a very high earner for the whole term of the loan you will not gain anything by paying it back early. If you do think that you will pay it back before the thirty year term is up, then it could be worth paying it back early to save interest. However, you should do the calculations and think about what might happen in your future before you decide whether or not to do this.