What your UK student loan repayments would be worth if you had invested them instead
Key Points
- Fifteen years of repayments invested in a Lifetime ISA would build £36,000 for the typical graduate.
- The same money in a pension returning 7% would be worth around £250,000 by State Pension age.
- Upper-quartile earners would accumulate £67,000 in a LISA or £471,000 in a pension.
- Typical Plan 5 graduates will repay £8,400 within 10 years of graduating.
- Cutting the repayment rate to 5% would leave £16,000 more in a LISA after 15 years.
15 years of student loan repayments would build £36,000 for the typical graduate if invested in a Lifetime ISA instead, according to modelling published by the Intergenerational Foundation.
The figure comes from a counterfactual in the report Repayment Repression, which redirects the first 15 years of Plan 5 repayments into savings rather than the Student Loans Company.
Lower earners would accumulate £14,500 over the same period and upper-quartile earners £67,000. The £36,000 for the typical graduate is equivalent to more than half the average first-time buyer deposit in England, which UK Finance put at £65,200 in the first quarter of 2026.
The same repayments directed into a pension returning 7% a year would leave the average graduate around £250,000 better off by State Pension age. Lower earners would accumulate £98,000 and higher earners £471,000.
The figures are nominal and rest on an assumed long-run return in line with the historical performance of typical pension funds.
Repayments are getting worse
Repayments now start earlier and bite harder in the years when graduates have the least.
Students who began courses in 2023 are expected to pay £8,400 within 10 years of graduating, with upper-quartile earners repaying £16,300 over the same period. That is a return to the early-years burden last seen under Plan 1, a system criticised at the time for the pressure it placed on graduates at the start of their working lives.
The Plan 5 repayment threshold of £25,000 sits almost level with the National Minimum Wage.
The Intergenerational Foundation recommends cutting the repayment rate from 9% to 5% for both Plan 2 and Plan 5 graduates.
Savings on that scale would add £16,000 to a Lifetime ISA within 15 years of graduation, or £185,000 to a pension pot by retirement.
The report estimates the reform would cost around £50 billion applied across all 11 Plan 2 cohorts and a further £5.5 billion for existing Plan 5 cohorts, and suggests phasing it in by one percentage point a year until 2030.
Deferring repayments carries its own costs. Pension contributions typically rise as retirement approaches, so repayments running into a graduate’s 50s and 60s cut into the years when saving matters most.
Plan 5 extends the repayment term to 40 years, meaning graduates face both a heavier early burden and repayments continuing into their 60s.
