So I was watching Martin Lewis’ video about Plan 1 loans, and now I’m sitting here confused 
. He’s basically saying, ‘Don’t overpay it.’ But IDK, I’ve got some spare cash, and I’m thinking, should I just throw it at my student loan or save it? Anyone else gone through this decision? It’s so complicated with all these thresholds and interest rates… Any advice?
Yeah, I watched that video too! It’s wild how he broke it down. Plan 1 loans seem so different from Plan 2. From what I understood, unless you know you’ll clear the loan before it wipes, overpaying doesn’t make sense. Just stick that money in savings, IMO.
Wait… what’s the difference between Plan 1 and Plan 2 again? I’m lost, lol.
Oh, so Plan 1 is for people who went to uni before 2012 (or Scotland/NI folks since 1998). Plan 2 is for people from 2012 onwards in England/Wales. The main thing is Plan 1 loans have lower tuition fees and interest, but you pay more each year since the repayment threshold is lower. Make sense?
Ahhh, got it! So Plan 1 means I’m paying more now, but I borrowed less overall? That’s kind of a relief .
Martin said something about inflation meaning the loan doesn’t really cost you anything. That threw me off. Like, if inflation and interest cancel each other out, what’s the point of overpaying? 
Yeah, exactly! He basically said the debt’s shrinking in real terms because of how inflation works. I guess it means you’re not really ‘losing’ money by not overpaying. It’s like borrowing money without the usual stress, if that makes sense.
Right, right. So keeping the cash in savings where it earns interest is smarter, huh? Like, use that instead of throwing it at a shrinking loan.
The part that stuck with me was the whole ‘once you overpay, you can’t get it back’ thing. That’s a big commitment. What if I lose my job or drop below the £19k threshold? No repayments, but I can’t touch the money I overpaid? That’s risky.
Yeah, that’s the catch. He was like, ‘Think very carefully,’ and it makes sense. If life throws you a curveball, you’ll regret not having that extra cash. Better safe than sorry.
Did he say anything about using the money for a mortgage instead? I feel like that makes sense, right? Like, keep your student loan and put the money toward a house?
Yeah, exactly! He mentioned that mortgages are way more expensive, so you don’t want to overpay the student loan just to end up borrowing at a higher rate later. Makes total sense now.
Yep! Mortgage rates are around 4-5%, while Plan 1 loans are only like 1.75%. So if you need to borrow later, better to keep the student loan and avoid high-interest loans.
Okay, but what if savings rates drop and the student loan interest rate goes up? Wouldn’t that make overpaying smarter?
Martin said to lock your savings for a max of one year. If things change, you can re-evaluate then. That way, you don’t lose flexibility.
Yeah, he mentioned keeping it flexible. Like, don’t rush into overpaying – just check in after a year and see where things stand.