Student Loan Repayment Plans to Change

A new student loan repayment plan, known as Plan 5, will affect all incoming undergraduate and PGCE students starting their courses this academic year. 

These students will face lower repayment thresholds of £25,000 per year, meaning they will pay 9% of any pound over that amount in their loan repayments. The threshold for anyone who started their courses between the 1st of September 2012 and July of this year will still be on Plan 2, so their threshold remains at £27,295.

Another key difference between these two repayment plans in England is that for those on Plan 2, student loans will be written off 30 years after the April on which they were due to start repayment. In contrast, loans for graduates on new repayment plan 5 will not be written off until 40 years after the April repayment starts.

The main reason given for these changes is so over 50% of graduates repay their student loans back in full, as opposed to current levels, around 20%.

When asked for his opinion on the topic, YUSU President Pierrick Roger commented: “The changes introduced to tuition loan repayment plans will push students into even more sustained debt. 

“On average, under plan 2, high earners are the only students who manage to pay off their loans by the 30-year wipe-off mark. £25,000 is the average graduate’s entry-level salary. The lowered threshold means lower-income students will start paying for their loans earlier and the push-back of the wipe-off by 10 years means they’ll be paying for longer. 

“I want to be categorical: these changes are disgusting and the government should be ashamed of itself,” Roger continued. 

Both these changes seem relatively minor tweaks to student loan repayment plans. However, the worry is that they could disproportionately affect those on lower and middle incomes by forcing them to pay a higher percent of their earnings  to settle  their student debts. 

It could also mean students from lower and middle income backgrounds will also have to spend more of their lives paying off their student debts than those from more financially privileged backgrounds.