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As of 2021, the average student loan debt for medical students in the UK is around £71,000 (most students graduate with £70,000-90,000 debt). This includes both tuition fees and living expenses (as medical courses in the UK are typically 5 or 6 years long, living costs tend to contribute to the majority of this debt). However, it is important to note that this is an average range, and individual student loan debt can vary widely depending on factors such as the university attended, living expenses, and personal financial circumstances.
For individuals who have a high income, it is possible to pay off student debt relatively quickly, often within 10-15 years. However, for those with lower incomes, it may take longer to repay the debt, up to 30 years. It is worth noting that after 30 years, any remaining student loan debt is written off.
This is a great calculator to determine roughly how long it would take you to pay off a UK student loan: https://www.student-loan-calculator.co.uk taking interest into account and even pay rises (not many of those in the NHS) and other considerations. For most doctors, the loan is paid off within the 20-30 year zone. This means you pay off the loan AND a lot of interest if you decide to make the minimum payments. The magic number 30 wasn't chosen at random...
As a doctor in the UK, you are likely to have accumulated a significant amount of student loan debt from your medical education. You may be wondering whether it is worth paying off this debt early by making extra repayments or continuing to make minimum payments. Here are some factors to consider when making this decision:
The Student Finance England Repayment Plan you're on (which determines your repayment terms)
The table below shows the current plans students may be on in England and the different rules that apply to each.
Plan | Plan 5: If you’re starting your course on or after 1 August 2023 | Plan 2: If you started your course between 1 September 2012 and 31 July 2023 | Plan 1: If you started your course before or on 1 September 2012. |
When does the loan get written off (no more repayments required)? | 40 years | 30 years | When you turn 65 |
How much do I pay? What is the salary threshold? | The repayment threshold for Plan 5 loans is currently £25,000/year (£2,083/month or £480/week) before tax. You pay 9% of what you make over this. | The repayment threshold for Plan 2 loans is £27,295/year (£2,274/month or £524/week) before tax. You pay 9% of what you make over this. | The repayment threshold is currently £20,195/year (£1,682/month or £388/week) before tax. You pay 9% of what you make over this. |
Interest rate | The interest rate for Plan 5 loans will be based on the RPI rate, which is a measure of inflation. | RPI + 3% (whilst you're still studying) then JUST RPI if you <=£27,295 or RPI + 3% if you earn over £27,295. This added percentage will start low and rise in line with whatever you're earning. It stops increasing when you start earning more than £49,130, at which point it's capped at 3%. | The Bank of England base rate (Retail price index/RPI) + 1% (currently 5%) |
If you applied to Student Finance Wales
The repayment plan you’re on depends on when you started your course and what type of course you studied.
If you applied to Student Awards Agency Scotland
You’re on Plan 4, whether you studied an undergraduate course or a postgraduate course.
Anyone with a Plan 4 loan would previously have been repaying under Plan 1. The only difference is that the threshold for repayment is significantly higher – great news for Scottish students and graduates.
This means that, like Plan 1, the rate at which Plan 4 Student Loans accrue interest is RPI + 1% but the repayment threshold is £25,375/year (£2,114/month or £487/week) before tax and you pay 9% of whatever you make over this.
*It's important to note that student loan deductions are taken from your pay the SAME time as other taxes so it is taken from your GROSS pay (pre-tax) NOT your net pay (post-taxes)
If you applied to Student Finance Northern Ireland
You’re on Plan 1, whether you studied an undergraduate course or a postgraduate course.
The current average salary of an F1 is the highest in England and just above the threshold (£29,384 pre-tax) and lower than the threshold in all of the other UK regions (£26,000 and below pre-tax) [BMJ -The Complete Guide To NHS Pay For Doctors], which means most doctors will start paying their loans off as soon as they start working. But if you take any time off, or there is no evidence of you having a salary, you won't have anything deducted. Therefore, it's not like other repayment plans like credit cards or payday loans that don't take this into account because they aren't automatically deducted from your salary.
Interest Rates
Student loans in the UK are linked to inflation and have relatively low-interest rates compared to other types of loans. This means that the cost of borrowing is low, and it may not be worth paying off your student loan early when you could invest the money elsewhere and earn a higher return. For example, you could argue it's a better return on your investment to invest a certain amount every year in the stock market (up to £20k for example in a shocks and shares ISA tax-free that could compound significantly over time and could even end up paying off your loan for you).
Let's take an example - please be aware of all of the specific circumstances in this example.
MBBS course length: 6 years, (let's say they intercalated in a BSc and took out the max maintenance loan for that year as well as tuition fee loan)
Student Loan Plan: 2
Amount of loan applied for: Max. maintenance every year (~£12,000) apart from last 2 years where they received a reduced maintenance loan (~£3000) due to applying for NHS Bursary + Tuition fees for 4/6 years (£9250 x 4) (NHS Bursary covered last 2 years).
Total loan accumulated from 6 years: £91,000 ([£9250 x 4] + [£12,000 x 4] + [£3000 x2])
Interest accumulated from 6 years: +£20,000 (based on RPI + 3% each year - very rough estimate, because this changes annually and has drastically changed due to recent cost of living crisis. For the 2022-23 year ALONE - interest rose to ~£5000 for some students, currently at 6.9%!)
Total due: £111,000
More interest will accrue before you start F1 so let's assume, the debt has now increased to £115,000 by the time this postgrad is working as an F1 in England. Below is a table of the repayments made by the above medical student if they were to become a GP in England with no breaks in their training (and let's assume no locuming / F3 because they'd pay more off in that case).
PLEASE NOTE: ALL OF THE BELOW ARE ESTIMATES
Year after uni and grade of UK doctor | Debt to pay | Salary (pre-tax) | Annual repayment made (9% of whatever is made > £27,295) | Interest accrued over the year (RPI + 3% starting lower the lower you earn) | New debt left |
1, F1 | £115,000 | £29,384 | £188.01 | £4000 (~3.5%) | £118,812 |
2, F2 | £118,812 | £34,012 | £604.53 | £4752 (~4%) | £122,959 |
3, ST1 | £122,959 | £40,257 + £9144 bonus = £49,401 | £1989.54 | £5533 (~4.5%) | £126,502 |
4, ST2 | £126,502 | £49,401 | £1989.54 | £5700 (~4.5%) | £130,212 |
5, ST3 | £130,212 | £51,017 + £9144 = £60,161 | £2957.94 | £6500 (~5%) | £133,754 |
6, GP | £133,754 | £62,269 | £3147.66 | £6680 (~5%) | £137,286 |
12, GP partner | £89,000 | £110,000 | £7443.45 | £6141 (~6.9% - highest interest rate cap to date) | £87,697 |
Now, these are really rough figures in the best way I've understood them which is why I'm sharing them in this way. But you can see how it's a losing battle until you begin to reach salaries of ~£100,000 or more and then you begin to see your loan actually coming down as your repayments beat interest. In the theoretical 12 years that this postgrad went on to become a GP partner, they would have already paid contributions of around £44,000 to their debt. With 28 years and £87,697 of debt to go. They'll pay more and more as their salary increases but are unlikely to ever pay off the full amount.
Overall, being taxed the minimum repayments are great unless you start making around the £100,000 mark. Most doctors reach that mark much later in their careers but before the 30-year deadline from when the loan is written off. Go figure(!) This is an even worse prospect for new students coming in on the Plan 4 loan which is written off in 40 years. Most students will definitely pay off their debt in that time.
Therefore, for those of us on Plan 2, it is worth considering whether making lump-sum one-off repayments are better to clear your debt at the stage when you've reached high earnings (>£100k), which would make the most sense.
Alternatively, if able to, saving up enough to pay off your entire debt before reaching that high-earning stage would allow you to take advantage of the lowest interest rates possible (since you earn less). But earning less = saving less and as a young doctor, that's the time your money will be pulled in lots of directions as you start your life (see below).
Other Financial Goals
Paying off your student loan early may not be the best use of your money if you have other financial goals, such as saving for a house or building a retirement fund. It is important to prioritise your financial goals and allocate your money accordingly.
Psychological Benefits
For some individuals, paying off debt can provide a sense of financial security and peace of mind. If you feel burdened by your student loan debt and want to eliminate it as soon as possible, paying it off early may be worth it for the psychological benefits.
What if I go abroad?
Student Finance England requires you to notify them if you'll be leaving the UK for 3 months or more. You should do this if you plan to leave in the next 18 months. They then work out if you have to repay while you're overseas and how much.
The rules for repayment are the same as in the UK, apart from different repayment thresholds for each country. Learn more about repaying your student loan if you go overseas for 3 months or more.
If you’re abroad, your repayment amounts are based on:
the minimum amount under Plan 1 for that country
the minimum amount under Plan 2 for that country
the minimum amount under Plan 4 for that country
the minimum amount under the Postgraduate Loan plan for that country
Once SLC has told you how much you need to repay, you can make repayments:
through your online account
by International Bank Transfer (IBAN)
In conclusion, whether it is worth paying off your student loan as a doctor in the UK depends on your individual circumstances and financial goals. If you have other financial priorities or are comfortable with the repayment terms, it may not be necessary to pay off your student loan early. However, if you want to eliminate debt and gain peace of mind, paying off your loan early may be a worthwhile investment. It is important to weigh the pros and cons and make an informed decision based on your personal situation.
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