It’s a personal call. And it’s very important for it to be an informed call.
It can be quite nuanced. In addition to individuals being in different circumstances,
different cohorts are on different deals, eg the government expects only 27% of full-time undergrads starting in 2022/3 to repay in full, yet expects 61% of those starting in 2023/4 to do so (
https://commonslibrary.parliament.uk/re ... s/sn01079/).
The write-off rules (not forgetting cancellation upon death) and repayment terms (take a break if earnings are low) make student loans different from standard loans. Also,
student loans do not affect credit ratings. Whilst the original rule-writers (and most bright-eyed undergrads) presumably had full expectation of full repayments in the majority of cases, the reality is markedly different.
How to assess which decision to make?
The MoneySavingExpert view is ordinarily to think of it as a tax rather than a loan.
But rarely is analysis provided with non-UK-residents in mind. Interest for most types of UK student loans is set to approximately match UK inflation, so most UK-based customers pay back in ‘real terms’ approximately what they borrowed. However, if living and earning overseas, the UK inflation may be very different from the inflation experienced in the country of residence/earnings, and create a disparity between amount borrowed and repaid (in real terms).
You say that historically you’ve chipped away at the loan but recently the outstanding loan balance has increased.
A 25% reduction in loan value over 15 years (as you report) aligns to an amortization timeline of about 45 years *if* all repayments are equal *and* loan interest is 2%. But of course, both can be highly variable over the life of the loan… as you have experienced.
If you were on the 25-year right off rule, it would seem likely that the write-off would come into play. But you are not. You are on (in your case) a lengthy write-off rule.
It may still be a factor. Take a sabbatical? Have a break in repayments, and balance rises due to interest. UK inflation hits 12%? Loan balance shoots up. Experience the choice between retirement or pay cut from age 60 at a Japanese employer? Repayments could stop if either option here brings you under the threshold. Retire through ill health? Repayments may stop. Experience wage stagnation, which can often happen in Japan? Repayments might go down if repayment thresholds rise due to UK inflation exceeding Japanese inflation, and the balance could increase.
If there are a run of years where interest is significantly greater than repayments, the outstanding balance could increase significantly. In some cases, the balance becomes irrelevant, as a partial write-off becomes inevitable. (73% of full-time undergraduates taking loans in 2022/3 are expected to have some of their loans written off.) Write-offs should not at all be confused with defaulting on a standard loan.
Repaying at the standard rate (with foreign thresholds adjusted each year) is a valid option, since this is designed to be at an affordable level, even for overseas residents (as the overseas repayment thresholds are calibrated to the cost of living in the country of residence).
You mention potential other uses for the money than lump sum repayment. I think it’s wise for this to factor into your thinking.
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