Threshold to pay back loan increases

THE biggest change to student finance since 2012 will see the loan repayment threshold rise to £25,000 per year.

English and Welsh students who took out loans from September 2012 onwards will now start to pay back when they earn £25,000 a year, instead of £21,000

Hundreds of thousands of graduates are expected to save up to £360 a year from the changes which came into effect on April 6.

Over the 30 year lifetime of a student loan, after which any outstanding funds are written off by the government, this equates to a potential saving for some graduates of up to £24,000, according to some analysts.

It will result in savings of up to £360 a year for anyone earning over £21,000, with those earning less than £25,000 paying nothing at all.

Graduates earning over the new £25,000 threshold are set to benefit too, with lower payments compared to before, for example:

■ £25,000 per year repays £0 per month instead of £30;

■ £27,000 per year repays £15 per month instead of £45;

■ £30,000 per year repays £37 per month instead of £67;

■ £33,000 per year repays £60 per month instead of £90;

■ £35,000 per year repays £75 per month instead of £105; and,

■ £40,000 per year repays £112 per month instead of £142.

Graduates living in the UK will not be required to take action in order to receive the saving. Repayments will be calculated automatically by employers (for those paid through PAYE) or as part of the Self-Assessment return to HMRC.

Full-time students are not required to begin repaying their loans until the April after graduation.