Students to Pay Off Loans Over 40 Years Instead of 30

Students to Pay Off Loans Over 40 Years Instead of 30

Daniel Hall 25/02/2022
Students to Pay Off Loans Over 40 Years Instead of 30

Students in England will pay back loans over 40 years instead of 30.

Under the current system, loans are written off after 30 years. Currently, graduates earning above £27,250 are required to contribute 9 per cent of their salary to repaying their student loan. 

After the official announcement of an overhaul of how graduates in England will repay tuition fee and maintenance loans in the future, ministers also urged universities to make “efficiencies” to cope with the reduced income they faced from a prolonged freeze on tuition fees. 

The changes would result in students who enrol in 2023-24 having to make repayments for 40 years rather than 30 under the student loan system that has been in place since 2012.

Save the Children labelled the reforms as “among the most regressive yet”, while the Institute for Fiscal Studies said that high-earning borrowers “stand to benefit substantially”.

The average debt among those who finished studying in 2020 was £45,000, government figures suggest.

Hundreds of pounds a year will be cut from the take-home pay of graduates following a government decision to lower the repayment threshold for student loans in England, hitting middle earners most while benefiting those on higher pay. The income level at which graduates start repaying their student loan will be reduced from £27,295 to £25,000 and this will remain set until 2026-27.

The interest rate will be cut to match the Retail Price Index (RPI) - one of the ways inflation is measured in the UK.

By requiring graduates to start paying back at £25,000, and to continue paying for an extra 10 years, the government hopes more will repay their loans in full.

The government will also cut interest rates on student loans from their current above-inflation level, allowing graduates to pay back no more than they borrow. 

Recent changes will not affect current students or graduates,

Other measures include a decision to freeze the cap on tuition fees at £9,250 for two more years, effectively cutting university funding at a time when inflation is surging.

The government is committed to pay an extra £900m over three years, including £750m for teaching targeted at science, technology, medicine and other high priority subjects. But the Russell Group of research universities said inflation meant the extra grant would not be enough to compensate for the cost of such courses.

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.

 
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