Students face repaying university loans earlier and for longer in shake up
STUDENTS could be hit with a bigger tuition loan bill under government plans to shake up how the cash is repaid.
The Treasury is considering lowering the income threshold for repayment, which is currently set at £27,295.
It means graduates would have to start paying back their student loans when they earn a lower salary.
Another measure could include extending the repayment window, which currently expires after 30 years, the Times .
The government is planning to consult on reforms to create a "sustainable and flexible student finance system" this spring.
English universities can currently charge UK students up to £9,250 in fees a year for an undergraduate degree.
Student loan interest rates
INTEREST rates on student loans are set annually and depend on what you earn.
They are based on March's RPI rate of inflation plus up to 3% depending on your income. According to these are:
- While you're studying until the April after you graduation, you're charged RPI + 3%,
- Earning under £27,295 a year, you're charged RPI
- Earning £49,130 a year or more, you're charged RPI + 3%
- Earning between £27,296 a year and £49,130 a year, the interest rate gradually rises up to 3%.
Students can also take out loans to cover the cost of living, although the amount they can access is based on their living situations and family income.
Students living at home can apply for a maximum of £7,987 and those moving away from home could be eligible for up to £9,488, rising to £12,382 in London.
Graduates pay back 9% of whatever they earn above the repayment threshold, which is currently set at £524 a week or £2,274 a month.
How much interest they are charged depends on how much you earn and what year you took out the loan. These are explained in the boxout above.
An independent review into higher education funding published two years ago found that an average of 45% of student loans will never be repaid.
This is because any unpaid student loan debt is written off after 30 years.
For example, Martin Lewis, the founder of Money Saving Expert, calculated that - under current rules - a student completing their undergraduate course in 2022 would have to earn £55,000 a year, rising to £177,000 within 25 years, to pay off their loan in full.
By that time, the student would have handed over £163,000 - more than three times what they already borrowed due to interest repayments.
On the other hand, a student earning £15,000 after graduating, rising to £64,000 within the 30 year period, would not repay any money and would have their loan wiped.
The government has already announced an overhaul of the student loan system this year, when it said this month that it will “transform the current student loans system”.
The new legislation, revealed in the Queen's Speech, will allow adults to access flexible loans for higher-level education and training at university or college, which can be used at any point in life.
The Treasury declined to comment on the potential shake up and the Department for Education has been contacted for comment.
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Earlier this month it was revealed that up to 60,000 people had been overcharged for student loan repayments.
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Money Saving Expert's Martin Lewis explained how graduates can claim a refund if they have been overcharged.
This explainer will tell you everything you need to know about student finance this year.