Student loan repayment thresholds to rise from next April – what you need to know
Student loan repayment thresholds for most borrowers will rise by hundreds of pounds next April.
The Department for Education has today revealed the new repayment thresholds – which set the minimum annual salaries at which you start repaying your student loan. It's also confirmed that interest rates will drop in September for most borrowers.
To understand more about student loan interest rates, see MSE founder Martin Lewis's two in-depth guides:
- Pre-1998 loans & Plan 1 loans – Should I repay my student loan?
- Plan 2 loans – Student loan – should I panic or pay it off?
How much can I earn before I start repaying my loan?
The repayment threshold will rise for most student loans from 6 April 2020:
- Plan 2 loans: All English and Welsh loans for those who STARTED uni in or after 2012. The repayment threshold will increase from £25,725 to £26,575/year.
- Plan 1 loans: ALL loans for those who STARTED between 1998 and 2011 PLUS Scottish and Northern Irish loans since 2012. The repayment threshold will increase from £18,935 to £19,390/yr.
- Postgraduate loans: The threshold will remain at £21,000/yr.
For pre-1998 mortgage-style loans, the deferment threshold – ie, the annual salary below which you can opt not to repay your loan – will rise from £30,737 to £32,347/yr from Sunday 1 September.
Some university leavers in this group have received letters from Erudio – the company that manages their student loans – offering them the chance to settle their loan by paying off as little as 20% of the amount outstanding, but many shouldn't take this offer. See our MSE News story for full details.
How are interest rates changing?
MoneySavingExpert.com reported earlier this year that interest rates were set to drop in September.
Now, the Government has confirmed how the interest rates will change from Sunday 1 September:
- Plan 2 loans: While studying you're charged the rate of the Retail Prices Index inflation measure, from March (2.4%), plus 3%, so from 1 September you'll be charged 5.4%.
From the April after you graduate, you'll be charged variable interest, depending on your income. Where income is £26,575 or less you'll be charged RPI, rising on a sliding scale to RPI plus 3%, where income is £47,835 or more.
- Plan 1 loans: Here the rate is set as the lower of RPI or the Bank of England base rate (its official borrowing rate), plus 1%. So your interest rate will remain at 1.75%.
- Pre-1998 loans: The rate here is RPI, so will drop to 2.4% from 1 September.
- Postgraduate loans: The rate is set at RPI plus 3%, so will drop to 5.4%.
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