Student loan repayment threshold raised

6 April 2018

From today, the way you repay your student loan has changed. The salary threshold for when you start repaying your loan has been raised and, for many, the amount you’ll repay each month has fallen. Here’s everything you need to know.

English and Welsh students who took out a student loan from September 2012 onwards now have to be earning more before they have to start repaying their loan. You need to be earning at least £25,000 a year before you need to start repayments – up from £21,000.

The Department for Education say this change will benefit 600,000 graduates this year alone.

“We are seeing more 18-year-olds than ever before attend university, including the highest ever number from disadvantaged backgrounds and we want to give these students a fair deal, both during their studies and afterwards too,” says universities minister Sam Gyimah.

“Not only will it benefit hundreds of thousands of graduates in the next financial year alone, but millions in the years to come.”

Once you start repaying your loan, you’ll also see less disappear from your pay packet each month as the percentage of salary paid back has been lowered too.

These changes will save the average graduate up to £15,700 over the 30-year lifetime of the loan, according to the Institute for Fiscal Studies (IFS). 

“Overall, repayments will fall by around £10,000 for the average graduate as a result of the threshold increase,” says Laura van der Erve, an economist at the IFS.

The biggest savings will be for graduates who may never completely clear their loan, as the delay to the start of repayments, and lower monthly payments, means they will probably end up repaying less of their loan before the 30-year cut-off when the loan is written off.

Higher-earning graduates, who would repay their loans in full, will pay less each year but this is likely to mean they just take longer to pay off their loan rather than saving any money.

“This change will be a welcome relief for many of the lowest-earning graduates,” says Amatey Doku, the vice-president for higher education at the National Union of Students.

“In recent years, the expected repayment for the lowest-earning graduates has increased by 30%, thanks to the freezing of the cap at £21,000 instead of rising slightly each year. However, in making this change, the government has at least acknowledged that there are serious flaws in how we fund higher education in this country.

“I hope this will not preclude a more in-depth consideration as part of the upcoming review into post-18 funding, lest this becomes patching up the holes on a sinking ship.”

Changes to pre-2012 loans

If you took out your student loan before September 2012 then the changes to your loan are more marginal.

The repayment threshold for English and Welsh students who took out loans before that date, and all students from Scotland and Northern Ireland, will rise marginally to £18,330 – up from £17,775 – in line with inflation.

The big change for post-September 2012 students is because they tend to have much bigger loans as that was when university fees in England rose to £9,000 a year.



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