A DUMMY’S GUIDE TO NEW STUDENT LOANS

Starting uni in 2023? Here’s what the new student loan system means for you.

After announcements regarding the student loan changes in the UK shook the system, a lot of prospective students are left wondering, what on earth is going on? With rumours students starting in 2023 and beyond will be left paying thousands more pounds than previous years, we think it is time for a little de-coding. Here are our top four most important questions, and our no-nonsense answers.

How much is a student loan now?

Well, this one entirely depends on the cost of your course, and how much maintenance loan you receive. But, the rule now is that you will repay 9% of your wages on anything you earn over £25,000, either until your loan is settled, or it has been 40 years since you left university.

So, let’s say for example, when you graduate, you’re earning £30,000. Of that income, you will be repaying around £37.50 per month or £450 a year. This will be taken straight out of your paycheck before it hits your bank account, so you don’t need to worry about budgeting or sending money.

How much do I have to pay upfront?

There is no upfront cost for a student loan. You will receive your maintenance loan money in lump sums to your bank account three times per year, and your tuition fee is paid directly to your university. However, it is important to note that the government loan scheme does account for additional support to come from your parents or guardians. Your maintenance loan is based on your household income, so if you are not receiving the maximum amount available, your parents or carers are expected by the government to support in funding the additional fee.

Why is it going to cost me more than previous years?

Previously, the repayment threshold was £27,295. Now, on the new plan-5 loans, it is £25,000 – meaning that you will start to repay your loan earlier than your predecessors. Plus, you will also pay it for longer – the maximum repayment term used to be 30 years, but for you, it is 40. Now, this doesn’t mean that your overall loan is more expensive than previous years, but it does mean that you are more likely to pay it off in full, rather than it getting wiped off.

Is my student loan debt?

There is no need to worry about debt collectors rushing to your door – your student loan is not classed as debt. Your credit score will not be affected, but it will show up on a mortgage application, just like a Netflix subscription. Essentially, your student loan is the best ‘loan’ you will ever have, as you aren’t charged masses of interest, and you never have to repay it if you aren’t earning enough.

So, hopefully now things are a little clearer. Essentially, your student loan will cost you more than your predecessors, as it will start being charged at a lower income, and you will be repaying it for longer. But, do not let this deter you from attending university. The monthly payments are still affordable, and will not be deducted if you aren’t earning enough to pay them. Plus, with a degree in your field, you are more likely to achieve a higher income, so the loan repayments will be a walk in the park. If you are looking for more information. Martin Lewis has a great blog here, or check out the Government website.

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