The UK government has announced changes to the way student loans will be repaid, sparking worry from experts that the changes will affect lower earning graduates the most.
What are the current repayment thresholds?
For current graduates, the student loan repayment threshold sits at £27,295 a year. This means that any graduate with a student loan earning above this threshold will pay a percentage of their salary/wage back to the government each month.
Your annual income is £28,800 and you are paid a regular monthly wage. This means that each month your income is £2,400 (£28,800 divided by 12). This is over the Plan 2 monthly threshold of £2,274.
Your income is £126 over the threshold (£2,400 minus £2,274). You will pay back £11 (9% of £126) each month.
In addition to this, once student debt reaches 30 years old, it is written off by the government.
What are the changes?
From September 2023, graduates will start paying back their student loan over a salary threshold of £25,000, down from £27,295.
The loan repayment term is also increasing from 30 years to 40 years.
With both changes, this will mean graduates will be paying up to £13 more per week in 2027-2028 compared to today’s rates.
Who will this affect?
These changes will affect all new and current students studying in the UK, but experts warn that graduates on the lower end of the income scale will be hit the hardest by the changes.
Although the changes may appear off putting to prospective students, the benefits of obtaining a university degree remain plentiful, including:
- Higher quality jobs
- Increased access to job opportunities
- Increased earning potential
- A pathway to advancement
- Networking opportunities
If you would like to learn more about studying in the UK, contact our friendly advisors today on +44 (0)23 9283 9210.