Students deferring their university courses until 2023 will be hit with new student loan rules which will see them make repayments for 40 years rather than 30.
The changes, which have been described as the implementation of a “lifelong graduate tax”, will see many students in England and Wales paying for their degree until retirement.
Students will also start making repayments at a reduced income level of £25,000 as opposed to the current cap of £27,295.
Experts say both of these measures will increase the cost of student loans, especially for those lower earners who just earn sufficient to make repayments.
Another change that will come into play is the interest rate charged. It can currently be as high as the Retail Prices Index (RPI) + 3 per cent but this will be cut to just RPI + 0 per cent for new borrowers, meaning that graduates will no longer repay more than they borrowed in real terms.
This change will have little impact on the lowest earners, but the interest rate cut will mean gains for higher earners who would have paid off their loans in any case.
Under the current rules, only a quarter of students who started full-time undergraduate degrees in 2020-21 are forecast to repay their loans in full. However, with the changes, it’s predicted that up to 70 per cent of new student loans are likely to be repaid in full.
The Institute for Fiscal Studies outlines this as the largest student loan reform since 2012.
It notes: “These changes will transform the student loans system. While under the current system, only around a quarter can expect to repay their loans in full, around 70 per cent can expect to repay under the new system.
“This is partly due to substantially higher lifetime repayments by students with low and middling earnings and partly due to less interest being accumulated on loans.
“The long-run benefit for the taxpayer will be around £2.3bn per cohort of university entrants, as higher repayments by borrowers with low or middling earnings will be partly offset by lower repayments of high-earning borrowers.”
Liz Gallagher, from tax advisory firm Hurst, urged students to “rethink their plans for a gap year” to avoid being hit by the new rules.
Student loans will not change for Scottish students, although they already have a £25,000 income threshold following a large increase in 2021.
New Scottish students have a 30-year repayment term, with the interest rate currently set at 1.5 per cent.
In a bid to reduce the financial pressure on students, in August the Department for Education announced that the maximum interest rate on student loans in England and Wales will be capped at 6.3 per cent from September onwards.
It was due to be capped at 7.3 per cent, after Ministers intervened in June to reduce it from the 12 per cent it would have otherwise reached due to rising inflation, but it was decided to cut them again in light of even higher costs.
At the moment, those currently at university are paying 4.5 per cent interest on their student loans.
> Another change that will come into play is the interest rate charged. It can currently be as high as the Retail Prices Index (RPI) + 3 per cent but this will be cut to just RPI + 0 per cent for new borrowers, meaning that graduates will no longer repay more than they borrowed in real terms.
This sounds good, but it’s really a handout to better paid graduates – people on lower incomes won’t benefit at all from it.
Classic Tory policy.
They really just need to set up a graduate tax and be done with it.
These ever more complicated “loans” that don’t behave anything like regular loans are just complicating things.
I am lucky to have the education that I have. It will afford me many opportunities. I am more than happy to pay more tax to show my gratitude. It would feel much better than paying back a loan whose terms were completely outside of my control.
My reason for not going to University is simple.
As long as the Vice Chancellors continue to rake the gravy salary in, they can all go f**k themselves.
Not to sound selfish but are these changes just for new students not retroactive?
Fuck the tories on this one.
(Part 274 of the duck the tories novel I’m writing)
It’s a deliberate act of obfuscation at this point. They are trying to make the loan scheme as convoluted and confusing as possible to make it so students do not fully understand the terms of the loans they are taking out.
They really love kicking people while they’re down don’t they
I’m from a working class family but got a good degree on maximum loans and grants and scholarships. I make decent money but because I have to pay my student loans back and the interest keeps pilling up I will be 10% worse off than my peers in the same job who have the same degrees but who’s family could pay some or all uni costs up front. I’ve calculated that if I take maternity leave at any point in my life I will likely never pay my loan off in my life. Interest on student debt hurts social mobility
Spend that year learning German and get a degree for about €250 a term which often includes a Ubahn pass
This is all going to backfire, instead of offering incentives to be educated in the good ole UK, countries like the US,Canada,New Zealand, are going to lure them, you’ll see.
I’d like to see the UK switch to the NZ model for student loans. You pay 0% interest for the lifetime of the loan however you have to pay the entire thing back. But, if you move out of the country then you start paying interest on it.
Lol op is a degenerate who spends his life posting vitriol on this sub and weird porn.
13 comments
Students deferring their university courses until 2023 will be hit with new student loan rules which will see them make repayments for 40 years rather than 30.
The changes, which have been described as the implementation of a “lifelong graduate tax”, will see many students in England and Wales paying for their degree until retirement.
Students will also start making repayments at a reduced income level of £25,000 as opposed to the current cap of £27,295.
Experts say both of these measures will increase the cost of student loans, especially for those lower earners who just earn sufficient to make repayments.
Another change that will come into play is the interest rate charged. It can currently be as high as the Retail Prices Index (RPI) + 3 per cent but this will be cut to just RPI + 0 per cent for new borrowers, meaning that graduates will no longer repay more than they borrowed in real terms.
This change will have little impact on the lowest earners, but the interest rate cut will mean gains for higher earners who would have paid off their loans in any case.
Under the current rules, only a quarter of students who started full-time undergraduate degrees in 2020-21 are forecast to repay their loans in full. However, with the changes, it’s predicted that up to 70 per cent of new student loans are likely to be repaid in full.
The Institute for Fiscal Studies outlines this as the largest student loan reform since 2012.
It notes: “These changes will transform the student loans system. While under the current system, only around a quarter can expect to repay their loans in full, around 70 per cent can expect to repay under the new system.
“This is partly due to substantially higher lifetime repayments by students with low and middling earnings and partly due to less interest being accumulated on loans.
“The long-run benefit for the taxpayer will be around £2.3bn per cohort of university entrants, as higher repayments by borrowers with low or middling earnings will be partly offset by lower repayments of high-earning borrowers.”
Liz Gallagher, from tax advisory firm Hurst, urged students to “rethink their plans for a gap year” to avoid being hit by the new rules.
Student loans will not change for Scottish students, although they already have a £25,000 income threshold following a large increase in 2021.
New Scottish students have a 30-year repayment term, with the interest rate currently set at 1.5 per cent.
In a bid to reduce the financial pressure on students, in August the Department for Education announced that the maximum interest rate on student loans in England and Wales will be capped at 6.3 per cent from September onwards.
It was due to be capped at 7.3 per cent, after Ministers intervened in June to reduce it from the 12 per cent it would have otherwise reached due to rising inflation, but it was decided to cut them again in light of even higher costs.
At the moment, those currently at university are paying 4.5 per cent interest on their student loans.
> Another change that will come into play is the interest rate charged. It can currently be as high as the Retail Prices Index (RPI) + 3 per cent but this will be cut to just RPI + 0 per cent for new borrowers, meaning that graduates will no longer repay more than they borrowed in real terms.
This sounds good, but it’s really a handout to better paid graduates – people on lower incomes won’t benefit at all from it.
Classic Tory policy.
They really just need to set up a graduate tax and be done with it.
These ever more complicated “loans” that don’t behave anything like regular loans are just complicating things.
I am lucky to have the education that I have. It will afford me many opportunities. I am more than happy to pay more tax to show my gratitude. It would feel much better than paying back a loan whose terms were completely outside of my control.
My reason for not going to University is simple.
As long as the Vice Chancellors continue to rake the gravy salary in, they can all go f**k themselves.
Not to sound selfish but are these changes just for new students not retroactive?
Fuck the tories on this one.
(Part 274 of the duck the tories novel I’m writing)
It’s a deliberate act of obfuscation at this point. They are trying to make the loan scheme as convoluted and confusing as possible to make it so students do not fully understand the terms of the loans they are taking out.
They really love kicking people while they’re down don’t they
I’m from a working class family but got a good degree on maximum loans and grants and scholarships. I make decent money but because I have to pay my student loans back and the interest keeps pilling up I will be 10% worse off than my peers in the same job who have the same degrees but who’s family could pay some or all uni costs up front. I’ve calculated that if I take maternity leave at any point in my life I will likely never pay my loan off in my life. Interest on student debt hurts social mobility
Spend that year learning German and get a degree for about €250 a term which often includes a Ubahn pass
This is all going to backfire, instead of offering incentives to be educated in the good ole UK, countries like the US,Canada,New Zealand, are going to lure them, you’ll see.
I’d like to see the UK switch to the NZ model for student loans. You pay 0% interest for the lifetime of the loan however you have to pay the entire thing back. But, if you move out of the country then you start paying interest on it.
Lol op is a degenerate who spends his life posting vitriol on this sub and weird porn.
Why would anyone listen to his take on this.