Major changes coming to student loans for university newcomers this September
As pupils open their A-level results and the scramble for University places begins, they will face major changes to student loans from September.
The student finance loan is given to all students that apply for it and helps pay for rent, food and general living costs when at university.
How much students get depends on their parents’ income (or partner if they are a mature student) – and loans for those heading off to uni from this September will be different to previous years.
So what are the main changes to expect and do they apply across the whole of the UK? Let’s find out.
What are the changes to student loans?
A new plan
Anyone taking out a student loan in England for a course starting on or after August 1, 2023 will be on a new scheme, known as Plan 5.
Those in Scotland, Wales and Northern Ireland will not be affected by the changes and remain on those countries’ existing plans.
Everyone in England who is already on another Plan (eg 1 or 2) will be unaffected.
Repayments
Essentially, those on Plan 5 will start paying the loan back sooner – when they’re earning over £480 a week, £2,083 a month or £25,000 a year.
Annual earnings at which UK student loan repayments start
- Plan 1 – £22,015
- Plan 2 – £27,295
- Plan 4 – £27,660 (Scotland)
- Plan 5 – £25,000
- Postgraduate loan – £21,000
This compares to repayments kicking in at £524 a week, £2,274 a month or £27,295 a year for those on Plan 2 (people who started uni on or after September 1, 2012).
The earliest anyone on Plan 5 will start making repayments is April 2026, even if they drop out, and the payments are taken, as now, either through pay-as-you-earn (PAYE) or via self assessment.
Students pay:
- 9% of income over the threshold on Plan 1, 2, 4 or 5
- 6% of income over the threshold on a Postgraduate Loan plan
Interest rates
Students usually pay interest based on the Retail Price Index (a measure of inflation) PLUS up to 3% as their earnings rise – however, the extra 3% will not apply to new students on Plan 5.
There is also currently a temporary interest rate cap for all student loans, set at 7.1%, which is reviewed every three months. This was brought in when the Retail Price Index was over 9%.
The government’s advice to students says: ‘During some periods we may apply an interest cap to ensure you’re not being charged a higher interest rate than the average found in the commercial market.’
As things stand right now, new students on Plan 5 would be accruing the full capped rate – 7.1% interest – on their loans.
With inflation running high, interest rates paid by students have fluctuated hugely – back in the 2015/16 academic year, students on Plan 2 saw lower interest of 3.9% applied to their loans.
You can find out more about student loans and repayments at gov.uk.
MORE : Nearly 400 uni students investigated for using ChatGPT to plagiarise assignments
MORE : Crackdown on ‘rip-off’ university degrees with poor career prospects
MORE : The simple trick that could help you save £720 a year
Follow Metro across our social channels, on Facebook, Twitter and Instagram
Share your views in the comments below