Martin Lewis warns one financial move is akin to ‘flushing away’ money for most people | Personal Finance | Finance
Most graduates are wasting money by overpaying student loans (Image: getty)
A massive number of graduates have “thrown away” money by trying to pay back their student loans quicker, warned personal finance guru Martin Lewis. The Money Saving Expert says most borrowers will fail to cleat their loans within the 30 years before they wipe, so any overpayments will effectively be “flushed” away by not reducing the amount they have to fork out over future years.
Latest official figures revealed £558million was paid in extra repayments last year – a record £10.7million a week – as borrowers try to beat soaring interest rates that can push debts higher month after month. The statistics showed a record 94,819 people made voluntary payments in 2025/26, and the total amount voluntarily repaid has surged by more than 150% in five years, up from £218million in 2020/21.
Money Saving Expert Martin Lewis on ITV (Image: ITV)
The average borrower making overpayments is now handing over £5,892 a year on top of the mandatory deductions that might be plucked out of their wages.
Many are doing so in a bid to escape what critics describe as a student loan “trap”, where high interest charges can see debts grow even while repayments are being made.
But financial experts fear some graduates will have paid just a fraction of their debt meaning the payments will make no difference to the amount taken out of their monthly pay cheques.
Across the last five years, borrowers have voluntarily repaid more than £2.3billion in an effort to reduce their balances more quickly.
Under the Plan 2 system, graduates repay 9% of earnings above £27,295 a year, with deductions taken automatically through the tax system.
Interest is then added to the loan and it rises with income – from inflation (RPI) for lower earners up to RPI plus 3% for higher earners.
Critics say this structure means some borrowers can see the total amount they owe increase despite making monthly repayments, prompting many to overpay in a bid to get ahead.
Student loan overpayments (Image: PA)
Campaigners warned the figures point to a growing divide between graduates who can afford to overpay and escape the system, and those who remain locked into decades of repayments.
Mr Lewis, founder of MoneySavingExpert, fears many people have been “panicked into overpaying” and for most borrowers it would be money “flushed” away.
He said: “The fact that they have paid off £1,000 or £2,000 will not be enough to change the fact that they won’t clear the loan within the 30 years before it wipes.
“And that means they will not pay a penny less in future because they overpaid by £1,000 or £2,000. That money has been thrown away.
“The higher income you have, the more likely to clear within the 30 years and the more likely therefore overpaying becomes realistically beneficial for you.”
Tom Allingham, student loans expert at Save the Student, added: “While it might make sense for some graduates to make voluntary repayments on their student loans, for many more it won’t be a sensible financial move.
“Unless you’re very confident you’ll eventually repay in full, have a significant sum of money available and don’t have other financial goals to fund (like a deposit or other debts), repaying your loan early may not be the best use of your money.”
