STUDENT LOAN SHAKE-UP: WHAT DOES IT MEAN FOR YOU?
An enormous shake-up to student finance and the way university loans are managed has been revealed today. The changes, which are brand new government plans that signal widespread reform, will see future students pay back far more than those who have already started uni.
Thousands of Brits are understandably concerned by the news, and have been left asking questions about how it affects them in real terms. Luckily, experts at money.co.uk have put together a handy guide with all the need-to-know information.
James Andrews, Senior Personal Finance Editor at money.co.uk, said: “Today’s announcement marks the biggest shake-up to student finances in years, and has understandably left millions of current, former and future students asking questions about how the changes will affect their finances.
“One of the main changes is that graduates starting their courses from September must pay back 9% of what they earn above £25,000-a-year, once they start work. That’s down from the current threshold of £27,295, and means more of your earnings will go into loan repayments.
“If you are a university student or graduate now, the existing threshold will remain in place until at least April 2025.
“Another one of the more popular reforms is likely to be a student loan interest rate cut to the Retail Prices Index (RPI). This means the student loan repayment rate is set at inflation and you’ll be charged less in interest.
“Another major change is that the length of time graduates have to pay off their loan has been extended to 40 years – up from the current 30-year limit.
“This means future students will, on average, pay far more back than under the current system. However, higher earners might end up better off.
“Currently, only about one graduate in five clears their loan before it’s wiped 30 years after leaving uni. Lower interest rates and earnings thresholds – coupled with a longer time before the loan is wiped – mean this will rise to about half of graduates under the new system.
“It also means the top fifth of earners, who would have paid back their loan anyway, will now pay back less than before as they’ll clear their debt sooner.
“Another key takeaway from today’s announcement is that, despite calls for a reduction, tuition fees will remain at £9,250. That means if you’re a student beginning your course up to and including 2024/25, you must be prepared to pay almost £30K in fees alone.
“The government has also published a consultation setting out plans to deliver a Lifelong Loan Entitlement (LLE), which would provide students with thousands of pounds to study, train, retrain or upskill through flexible and modular courses.
“The LLE is still in the consultation stage, so full details about this option are not yet available.
“If you’re considering going to university in the next year, it’s a good idea to make sure your finances are in order first. Compare the best bank accounts for teenagers, including some of the top student deals, using money.co.uk’s handy comparison tool here: https://www.money.co.uk/current-accounts/bank-accounts-for-teenagers.htm.”