student loan repayments

Students may have to pay their student loans back sooner, according to reports

According to recent reports, government ministers are reportedly planning to lower the salary threshold for student loan repayments. This means that graduates will start paying their student loans back much sooner than currently. This comes after a continuous increase in the threshold under both Boris Johnson and Theresa May.

What is the threshold currently? 

student loan repayments
Source: The Guardian

Once you have finished your degree, you start repaying your student loan the April after you leave your course (or the April 4 years after you started your course for part-time students). Currently, you only pay your student loans if you are earning over the threshold amount. This threshold differs depending on the repayment plan you’re on.

Plan 1

Graduates are on Plan 1 if they’re:

  • an English or Welsh student who started an undergraduate course in the UK before 1st September 2012
  • a Northern Irish student who started an undergraduate or postgraduate course in the UK on or after 1st September 1998
  • an EU student who started an undergraduate course in England or Wales on or after 1st September 1998 and before 1st September 2012
  • an EU student who started an undergraduate or postgraduate course in Northern Ireland on or after 1st September 1998

On this plan, graduates will repay when their income is over £19,895 per year (before tax). You then pay 9% of the amount you earn over the threshold. So if you are earning £27,000 and you are on this plan, then your income will be £593 over the threshold, so you will pay back £53 per month (9% of the amount over the threshold).

Plan 2

Graduates will be on Plan 2 if they’re:

  • an English or Welsh student who started an undergraduate course anywhere in the UK on or after 1st September 2012
  • an EU student who started an undergraduate course in England or Wales on or after 1st September 2012
  • someone who took out an Advanced Learner Loan on or after 1st August 2013

On this plan, graduates will repay when their income is over £27,295 per year (before tax). You then pay 9% of anything over this. For example, if your annual income is £28,800 and you’re paid regularly, your income works out at £126 over the threshold, and so you will pay back £11 each month (9% of the amount over the threshold).

Plan 4

Graduates will be on plan 4 if they’re:

  • a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1st September 1998
  • an EU student who started an undergraduate or postgraduate degree in Scotland on or after 1st September 1998

On this plan, graduates will repay when their income is over £25,000 a year (before tax). You then pay back 9% of what you earn over the threshold. For people earning £33,000 a year, you would be £667 over the threshold, and so you would pay back £60 per month (9% of what you earn over the threshold).

Postgraduate Loan

Those students on a postgraduate loan repayment plan will be:

  • an English or Welsh student who took out a Postgraduate Master’s Loan on or after 1st August 2016
  • an English or Welsh student who took out a Postgraduate Doctoral Loan on or after 1st August 2018
  • an EU student who started a postgraduate course on or after 1st August 2016

Graduates on this plan will repay when their earnings are over £21,000 a month. For this plan, students pay back 6% of their earnings over the threshold. So if you’re earning £28,800, you’d be over by £650, nd so you’d pay back £39 per month.

What is the new proposal? 

Rishi Sunak student loans
Source: NBC News

Following concerns in government that the taxpayer pays too much towards university courses, Rishi Sunak reportedly wants to change these repayment details. An unnamed minister told media outlets that “the plan” is to reduce the threshold for Plan 2, apparently as low as below £25,000 annually.

This is not the first time this has been suggested – the 2019 Augar review recommended the threshold be lowered to £23,000, and the Higher Education Policy Institute has previously suggested a cut to less than £20,000. Reports currently state the reduction would be to a figure higher than £20,000 – but it is uncertain as to how much higher.

What has the response been?

This news comes shortly after the news that graduates will also be paying more National Insurance each month. This has led to members of the public, MPs and graduates calling out the government for “widening the gap” between the working class and the wealthy. People have also pointed out that this change would hit female graduates most, with them earning the lowest and middle incomes. Estimates have been made that these graduates would pay £10,000 more.

The Department for Education has told the media that the student loan system was “designed to ensure all those with the talent and desire to attend higher education are able to do so, whilst ensuring that the cost of higher education is fairly distributed between graduates and the taxpayer”, and that they are continuing to consider the “recommendations made by the Augar review”.

The National Union of Students said it was “totally opposed” to the idea, and that it is an astounding injustice.

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