Changes to Student Loan Repayments in the UK (September 2022)
What are the changes to student loan interest rates and thresholds?
For those with a student loan on Plan 1, the interest rate has been set at 2.75%. This is the Bank of England base rate plus 1%. If the base rate is changed during the year, this rate may be adjusted accordingly. The repayment threshold for Plan 1 loans will rise to £22,015 from the 6th of April 2023, with the rate at which you repay remaining at 9%.
For those with a student loan of Plan 2 or a Postgraduate Plan, interest rates have been capped at 6.3% between the 1st of September 2022 to the 30th of November 2022. From the 1st of December 2022 to the 31st of August 2023, the maximum interest rate cap will be increased to 7.3%. The repayment threshold for Plan 2 loans will be £27,295 from the 6th of April 2023, with the rate of repayment remaining at 9%.
Postgraduate plans will be announced in due course.
What plan am I on?
Plan 1
If you’re on Plan 1, you’re an English or Welsh student who began studying for a UK-based undergraduate degree before the 1st of September 2012, or a Northern Irish student who started an undergraduate or postgraduate course in the UK on or after the 1st of September 1998.
EU students may also be on Plan 1 if they studied in England or Wales between the 1st of September 1998 and the 1st of September 2012, or in Northern Ireland after 1998.
Plan 2
If you’re on Plan 2, you’re an English or Welsh student who began studying for a UK-based undergraduate degree on or after the 1st of September 2012, or an EU student who started an undergraduate course in England or Wales on or after the 1st of September 2012.
You will also be on Plan 2 if you took out an Advanced Learner Loan on or after the 1st of August 2013, or a Higher Education Short Course Loan on or after the 1st of September 2022.
Postgraduate plan
You’re on a postgraduate plan if you’re an English or Welsh student who took out a Postgraduate Master’s Loan on or after the 1st of August 2016, or an English or Welsh student who took out a Postgraduate Doctoral Loan on or after the 1st of August 2018.
EU students are also on a postgraduate plan if they started a postgraduate course on or after the 1st of August 2016.
Plan 4
You’re on Plan 4 if you are a Scottish student who started a UK-based undergraduate or postgraduate course on or after the 1st of September 1998.
EU students may also be on Plan 4 if they studied an undergraduate or postgraduate course in Scotland on or after the 1st of September 1998.
What do these changes mean to me?
Unlike private loans, student debt is designed to only be paid when you can afford to pay it. In fact, it is estimated that only around 25% of graduates will pay off their student loans, with the remainder being written off after a set period of time. This means that the changes outlined in this article are unlikely to have a great impact on your finances.
For those who will be affected, a cap on interest rates may be a welcomed piece of news as the increased cost of living continually sees interest rates rising. Despite this, some critics are calling for earning thresholds to be increased in line with the average salary.
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