Three big changes are hitting student loans this year
Students starting university in 2023 will face significant changes to loans, marking the biggest shift in a decade. These changes will only affect new starters and not those already enrolled or graduated.
New repayment plan introduced
Starting from September, a new repayment plan called Plan 5 loans will be added to the student finance system. This will apply to undergraduates, postgraduates, and those with an advance learner loan starting their course on or after August 1.
Changes to repayment threshold
One of the changes is a decrease in the amount a graduate can earn before they start repaying their loan. Currently, for graduates with a Plan 2 loan who graduated after 2012, repayment starts at £27,295. However, from this academic year, the amount will decrease to £25,000, meaning graduates will likely have to start repayment sooner than before.
Extended debt repayment period
Under the current loan repayment rules, the debt is wiped after 30 years from the April after graduation, unless paid off during that time. With the new Plan 5 terms, the debt will be cancelled after 40 years. This means that most graduates will be paying off their loans for the duration of their working lives.
Changes to interest rates
Interest rates on student loans are determined by the rate of RPI inflation. Under the current system for graduates with Plan 2 loans, interest is added at the rate of RPI plus 3%. However, for new students, the interest rate will be set at RPI only, both during and after studies. This means that new students will not be charged additional interest.
For more information on student loans, including loan amounts, tuition fees, and application processes, please refer to our handy explainer.
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