Student loan repayments are changing
Here’s how the changing student finance repayment rules will impact you.
We recently gave you an update on Theresa May’s upcoming Tuition Fee Review, but regardless of how that pans out, we have some news for current or future students which we think will be well received.
Thanks to a new Government ruling, students in England or Wales who started university after (or during) 2012, won’t have to start paying back their loan until they earn £25,000 a year or more.
First declared back in October 2017, the change will come into effect as of April 6th 2018 and this wage threshold will be altered each year, taking into account the average salary, which they’ll base on information from the Office of National Statistics.
So, what exactly will change?
- Until you earn over £25,000 a year, you won’t make any payments. Before April, you would have started making payments when you passed the £21,000 threshold
- When you start earning over £25,000, you will be required to pay back 9% of the money you earn above the threshold, which will be much less than it would be currently
For example, if you had a £30,000 salary before April 2018, you’d pay back 9% of £9,000 per year, which is £810. After April, earning this amount would mean paying back 9% of £5,000, which is £450.
How do interest rates work? Will they change too?
- While you’re at uni, the amount of interest you’re charged is calculated at the rate of inflation (ROI), plus 3%, until you graduate
- After uni, the current rules mean you would progress between being charged ROI until you earn £21,000 and ROI plus 3% when you get to £41,000. In April, these amounts will change to £25,000 and £45,000 respectively
So for example, you’ll pay ROI plus 1.5% when you reach £35,000 and ROI plus 3% when you earn £45,000.
What if you study in Scotland or Northern Ireland?
Scottish and Northern Irish students (along with pre-2012 students in England and Wales) will see their repayment threshold increase from £17,775 per year to £18,330 from April 6th. Again, these graduates will pay back 9% of the earnings which come above the new figure.
Good news, right? For more bitesize updates on finance and politics, keep an eye on our blog. We do the research so you can stay in the loop and stay educated, while you’re in education!
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