Student loans: What’s changing from September?
Students starting university in September 2023 will be subject to big student finance changes.
Talking about the reforms on ITV’s Good Morning Britain, the Money Saving Expert, Martin Lewis, explained it as “the biggest change to English student finance in a decade”.
He explained that the changes moved the financial burden away from the taxpayer and “the individual will contribute a lot more” going forward.
He added: “Many graduates will pay double under the new system than they do under the current system.”
But, what exactly will happen with loans taken from September onwards? Here is everything we know.
What are the new Student Finance changes?
Three major changes will occur for students who will start their university education from September 2023 onwards, with new pupils being given Plan 5 loans.
Firstly, the repayment threshold has been changed. This refers to when you are expected to start repaying 9 per cent of everything you earn above a certain value. Currently, the threshold sits at £27,295 but from September 2023 it will be lowered to £25,000.
Secondly, the years after which your student loans are wiped out have changed. The current rules wiped English students’ slates clean after 30 years even if they hadn’t managed to pay it all off. But, now this will be increased to 40 years.
Martin Lewis says this effectively makes the repayments “a form of graduate tax”, adding: “For all intents and purposes, the vast majority of students, well graduates, will be repaying their loans for their entire working lives.”
Thirdly, interest rates will be lowered to match inflation. The interest rate, which is charged from the day you are given the loan, is currently the Retail Price Index plus a 3 per cent charge. This will decrease from September 2023.
The Money Saving Expert commented on this change, saying: “This means in real terms you don’t pay any added interest.”