Changes to your student loan you should know about

by Ed Firmin

Posted on Thursday, December 3rd, 2015 at 10:00

You may have seen some news coverage last week on the Autumn Statement, kinda like a secondary Budget, announced by the Chancellor.

Most of the headlines were about buy-to-let, tax credits etc. but you may have missed the news about student loans. And it’s not surprising, it was one of those hidden things buried away in page three hundred and something.

So what was announced? Essentially, it’s going to mean that students are going to have to pay back more of their student loan than previously thought.

So what’s changed? Students only start paying back their loans once they graduate and they’re earning above £21,000 per year. This applies to students who started university from 2012. Nine percent of their income will go towards paying their loans back.

So far, so good. Back in 2010, the Government promised that from April 2017, the threshold that students would have to start paying back their loan would increase in line with average earnings. Makes sense. As inflation increases, so should the threshold.

However, the Government has now changed its mind on that, and scrapped that decision. Which means that students will end up having to pay more of their incomes towards the loan repayments. Sources have worked that out to be an average of £306 each year by 2020-2021 if graduates are earning over £21,000.

Ouch. So students are effectively not getting the deal they signed up to when they started university. Whilst this may not affect you for a few years, and it may not seem like a lot to you, it’s still going to mean that you’ll be taking less money from your salary when you’re earning.

And it also means that it could change again in the future. Something which is quite surprising, as it wouldn’t happen with any other loan or debt that you signed up to from a bank or other financial institution.

So, as mentioned previously, this won’t affect some of you for a while, but it’s important to know that these changes have come into being, and what that will mean for you in the future.

If you have any questions that you’d like to ask about budgeting and finance, particularly when it comes to renting a property, so you know what’s involved, please get in touch, and I’m more than happy to help answer any queries you have.

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