Methodology · Updated July 2026
How This Calculator Works
Most student loan calculators ask you to type in a guess for future inflation and hold it fixed for 30 years. This calculator does something different. It reads inflation expectations directly from financial markets and uses published salary survey data broken down by industry. This page explains exactly how, in plain English.
The problem with fixed inflation guesses
Your student loan interest is linked to RPI, the Retail Prices Index. To project what you will pay over 30 years, you need a forecast of RPI for each of those 30 years.
Most calculators solve this by asking you to type in a single number, say 3%, and applying it every year until write-off. The problem is that nobody knows what inflation will be in 2035 or 2045. Assuming it stays constant for three decades is almost certainly wrong, and the error compounds over time.
A one percentage point difference in assumed RPI, held for 30 years, changes your projected total repayments by thousands of pounds and can shift the payoff year by several years. Getting the inflation assumption right matters.
Where our inflation forecast comes from
Instead of guessing, we read the inflation expectations that professional investors reveal when they trade government bonds.
The UK government issues two types of bonds (which are simply IOUs to investors that pay interest and return the original amount at the end):
- Standard bondsPay a fixed interest rate regardless of what happens to inflation.
- Inflation-protected bondsPay interest that rises with inflation each year, so the investor is protected if prices go up.
Both are traded freely every day. Investors decide how much to pay for each type based on their expectations. When they expect inflation to be high, they pay more for the inflation-protected bonds and less for the standard ones. The gap in price between the two types tells us what inflation the market is pricing in, for every year out to 30-plus years in the future.
The Bank of England publishes data on both bond types daily. We extract an implied inflation rate for each year of your loan term from this data, giving a complete inflation path rather than a single fixed number.
In plain terms
Instead of guessing 3% every year, we use the number that bond traders are currently betting their money on for each specific future year. This is the same method used by professional investors, pension funds and the Bank of England itself when they need a forward-looking inflation estimate.
This matters for your student loan because your Plan 2 or Postgraduate interest rate is explicitly tied to RPI. Using the market’s own expectation of RPI is methodologically correct in a way that a fixed assumption is not.
How we project your salary
How much you repay each year depends on your salary. We use two published data sources to project how your salary might grow, rather than applying a generic growth rate to everyone.
ONS salary surveys by industry
The Office for National Statistics (ONS) conducts the Annual Survey of Hours and Earnings, which covers hundreds of thousands of employees across every industry sector in the UK. This survey tells us what wages in your specific industry actually grew by, after adjusting for inflation. A software engineer in the information technology sector has a very different wage growth profile from a nurse in the health sector, and applying the same generic growth rate to both produces meaningless projections.
OBR long-run forecast
The Office for Budget Responsibility (OBR) is the UK’s independent fiscal watchdog. It publishes long-run projections for real wage growth across the whole economy (approximately 1.5% per year above inflation). We assume your sector’s observed growth rate gradually converges toward this long-run economy-wide figure over about 10 years, reflecting the well-established tendency for sector-specific booms to moderate over time.
High-income adjustment
Sector-average wage growth is partly driven by junior employees progressing through career bands. Someone earning twice the sector median is already near the top of the distribution, where individual pay growth is structurally slower than the sector average.
We reduce the assumed growth rate in proportion to how far above the sector median you earn, and this dampening is recalculated each year as your projected salary grows. By the time you earn twice the sector median, we assume your real wage growth has converged to the OBR long-run figure regardless of which sector you are in.
Example
A Finance sector employee at the sector median (around £55,000) would be projected at roughly half the observed sector growth rate. A Finance sector employee earning £110,000 (twice the median) would be projected at the OBR long-run rate of 1.5% real growth, plus inflation. A junior analyst at £30,000 would be projected at the full observed sector growth rate.
How the write-off date is calculated
Your loan is cancelled a fixed number of years after the April following your graduation or when you left your course. The rules are set by the government and depend on your plan:
| Plan | Write-off |
|---|---|
| Plan 1 | 25 years |
| Plan 2 | 30 years |
| Plan 4 | 30 years |
| Plan 5 | 40 years |
| Postgraduate | 30 years |
Cancellation is automatic and is not treated as taxable income. The write-off clock runs from your repayment start date regardless of whether you make any payments. We calculate the write-off year from your repayment start date and run the projection forward to that point. The calculator then tells you whether you are projected to repay in full before then, or arrive at write-off with a remaining balance.
What "present value" and "government subsidy" mean
Two figures in our results go beyond simple totals: the present value of repayments and the implied government subsidy. These are the most distinctive outputs of this calculator, and they need a brief explanation.
Present value of repayments
A pound received in 30 years is worth less than a pound today. This is not just because of inflation: even in a world with no inflation, receiving money later is less valuable because the recipient could have invested it in the meantime.
We convert all your future repayments into today’s pounds by adjusting for the time value of money. We use the same government bond interest rates that we use for the inflation forecast as the discount rate. This gives a single number representing what your full repayment stream is worth, in today’s terms.
This is useful because it allows a fair comparison between someone who repays quickly (paying more in nominal terms but earlier) and someone who repays slowly (paying less in nominal terms but spread over decades). Present value puts both on the same footing.
Implied government subsidy
If the present value of your repayments is less than your current loan balance, the government is effectively writing off the difference in today’s money terms, even if you repay the full nominal balance over 30 years.
This happens because the government borrows money at current bond market rates to lend to students, but receives the money back slowly over decades at the agreed repayment terms. The delay costs the government money even when every penny is technically repaid. A positive subsidy figure means you are getting a genuinely subsidised deal relative to the government’s cost of borrowing.
Why this matters
This calculation is the same approach used by the Institute for Fiscal Studies (IFS) when they value the student loan book for government accounting purposes. It tells you the true economic cost of your loan, as opposed to the nominal face value. Many borrowers who appear to "repay in full" in nominal terms are, in present value terms, receiving a significant subsidy.
What this calculator cannot tell you
This is a projection based on the best available data. It is not a prediction. There are several important things it cannot account for:
- !Future policy changes. Repayment thresholds, interest rate formulas and write-off rules have all been changed before and may change again. Plan 2 has already been amended several times since its introduction in 2012.
- !Your actual salary. Career breaks, redundancy, part-time working, moving abroad, changing sector and voluntary pay cuts all produce outcomes that no model can predict. The scenario tool lets you explore pessimistic and optimistic salary paths.
- !Major economic shocks. The bond market inflation forecast reflects current expectations. A recession, a pandemic, a major fiscal policy change or a shift in Bank of England policy can rapidly alter these expectations.
- !Emigration. If you leave the UK permanently, the rules around overseas repayments and eventual write-off are complex and depend on the country you move to and how long you have been there. This is not currently modelled.
Use the projection as a planning tool and a way to understand the structure of your loan, not as a definitive number. Always verify current thresholds at gov.uk before making financial decisions.
See it in action
Enter your balance and industry and get a year-by-year projection using current bond market data, not a fixed assumption.
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