From September, new students from England heading to university will have changes to their student loans. Adjustments to the student loan repayment system mean more students will be paying back their loans in its entirety. If you’re becoming an undergraduate in the new academic year, then we have all the new information for you on the student loan payment threshold and how long you’ll pay.
Sorting out your student finance is stressful enough, and that’s without the thought of paying it back someday. For students who have started university already, the incoming changes won’t affect you. However, those starting in September 2023 will be much more likely to not only start their repayment earlier but to be paying it for longer.
How Does Student Finance Repayment Work Currently?
For undergraduate students who have already started their course after 2012, you will begin paying your student loan back once you start earning £27,295 per annum. You can check your student loan plan to check exactly what you’ll pay depending on your years of study.
Current students also only have 30 years to pay off their student finance debt before whatever is left is wiped off.
Once you start earning over the student loan payment threshold, graduates will be 9% of what they earn over £27,295 towards their student finance repayment. So, if you earned £28,295, you would pay £90 over a year or £7.50 a month. The more you earn the more you will be paying back.
Student Loan Changes Starting In September
Unfortunately, this isn’t the case for those starting university this academic year. Here are the student loan changes.
Firstly, the student loan payment threshold is being lowered to £25,000. That means that as soon as you start earning that or above, you will start repaying your loan. The interest rate is currently the same as for older students at 9 per cent. However, this could change with inflation amid the mild recession.
The other big change is that new university students will have more time before their loan is wiped. Instead of 30 years, it’s being extended to 40 years. So, you will have an extra ten years of payment and you’re more likely to start paying your student debt earlier.
Under the old repayment system, less than a quarter of students would pay their debt back in full. With the new student loan changes, this will increase to over half.
Is The Student Debt Worth It?
Whether a student loan and the debt it leaves you with is worth it entirely depends on your financial circumstances.
For instance, if you are fairly well off, don’t need a big student loan and are guaranteed a well-paying job at the end of your degree, then no, it’s probably not. The quicker you pay off your student loan, the less interest you’ll pay. So, if you think you’ll be earning above £25,000 immediately and have to start paying it from the off, then only take what you need from student finance so you have less to pay back.
However, if you don’t think you’ll be paying back your student debt for a little then getting a student loan is probably for the best. The longer you’re beneath the student loan repayment threshold, the less time you have to pay it back. That means that you could possibly use leftover money from your student finance to help fund your future.
A student loan should never be considered free money. But, it can definitely help if you won’t be earning big bucks for a few years after university. That being said, if you think you’ll get a high-paying job pretty quickly, then it might not be quite so worth your while.