Students pay less in loan shake-up
English & Welsh loans for those who STARTED uni in or after 2012. This has been 9% above £21,000 ever since these loans launched in 2012. Now it’s 9% of everything above £25,000, and next year the threshold will start to rise annually with average earnings. So at every level of income you’ll repay £360/ year (£30/month) less, and those who currently repay less than £360/year won’t repay anything. For example…
Earn £20,000: you were repaying NOTHING, you’ll now repay NOTHING
Earn £25,000: you were repaying £360/yr, you’ll now repay NOTHING
Earn £35,000: you were repaying £1,260/yr, you’ll now repay £900 PLAN 1 LOANS: All those who STARTED 1998 – 2011 plus Scottish & Northern Irish loans since 2012. As the threshold here moves annually with inflation, the jump is much less significant, from £17,775 to £18,330, so repayments will drop by just under £50/yr. Those who started before 1998 are on a totally different system and that hasn’t changed.
Student loans are repaid via your employer through payroll, just like income tax. So your firm should change your repayments. Yet do double-check your April payslip. After all, I’ve been campaigning about the fact 100,000s of graduates have overpaid student loans and can claim £100s back, see mse.me/ studentloanoverpayments.
If you’re self-employed you repay through the self-assessment scheme by the January after the end of the tax year.
While for cash-flow purposes paying less each month is helpful, the normal rule with loans is try to repay as much as possible as fast as possible, so there’s less time for interest to accrue.
Yet student loans are different. That’s why I was very forcibly campaigning for this to happen after the government U-turned on its prior promise to increase the threshold.
It’s predicted on Plan 2 loans only the 17% highest earners (or those who didn’t take the full loans) will clear loans in full. The majority simply pay 9% for the full 30 years. Therefore, for them, paying less monthly also means paying less in total, possibly £1,000s less over the years. The overall impact on plan 1 loans is trivial.
Plan 2 interest thresholds have changed too. The interest rate added changes with RPI inflation each year. While studying it’s inflation (currently 3.1%) plus 3%, yet the thresholds after leaving have just changed. Earn under £25,000 (was £21,000): Interest = RPI Earn over £45,000 (was £41,000): Interest = RPI+3% Earn in between: Rate gradually rises from RPI to RPI+3% This means less interest for some, yet the impact’s limited as many don’t pay the full interest added anyway, because they don’t clear the loan before it wipes. See my ‘should I repay my loan at 6.1% interest’ guide at mse.me/studentrepay.
QChannel 4 Dispatches has exposed the Financial Ombudsman as incompetent due to lack of training, staff and unsustainable workload. It’s refused my PPI claim. How do I proceed? Vidia. Martin says: In general the Ombudsman has always been better, cheaper, and less risky than going to court. Yet it’s far from perfect. Your case was likely seen by a “case handler”, if you’re unhappy request for it to be reviewed by an actual Ombudsman. Full help to reclaim PPI at