Martin Lewis: Student loan costs will double for many in England from September 2023
If you're a student starting university in England this September, there are three MAJOR changes to student finance you need to know about. MoneySavingExpert.com founder Martin Lewis explains what's happening in his latest 'Wallet Wednesday' on ITV's Good Morning Britain.
Update: 20 June 2023: MoneySavingExpert.com founder Martin Lewis has written a detailed new guide explaining the huge changes to the English student finance system for those starting university this September (and their families).
See Martin's Six need-to-knows about ‘Plan 5’ English student finance.
The two-minute video went viral, so we've put the clip and the transcript below. For more info for new starters later this year, see our New student loans guide. For info on existing student loans, as well as on student loans in Northern Ireland, Scotland and Wales, see our Student loans mythbusting guide.
Martin Lewis – Good Morning Britain, 3 May 2023
From ITV's Good Morning Britain on Wednesday 3 May 2023, courtesy of ITV. All rights reserved.
Martin explains what's happening to student finance in September 2023
Martin's co-host Susanna Reid: "The country is about to face the biggest change to English student finance in a decade. It isn't an increase in tuition fees, it's a long-term cost change, isn't it, Martin?"
Martin Lewis: "Yes. So there are three main changes coming in for new starters in England in September. If you're already at university, this does not apply – you remain on the Plan 2 loans. These [new ones] are called Plan 5 loans.
"Now, the three big changes: two are negative for students, but good for the taxpayer one could argue. So that's the balance, it's about whether we swing the pendulum towards the taxpayer paying or towards the individual paying. And this is certainly moving it towards the individual paying."
The three changes impact how much of their loans students will repay
- "The first one is for new students, they will start repaying their student loans when they earn above £25,000. That's lower than the current threshold, which means you'll pay, on the same income, you'll pay more back each year.
- "The really big change is currently you stop repaying the loan after either you've paid it all off, which most don't, or [after] 30 years. It will now be 40 years. Which means for all intents and purposes, the vast majority of students, well graduates, will be repaying their loans for their entire working lives. It effectively becomes a form of graduate tax.
- "The third change is the interest rate, which is currently above inflation – RPI [Retail Prices Index] plus 3%, will be lowered, so it's just inflation. Which means in real terms you don't pay any added interest. I won't bother explaining, that's complicated."
Many graduates will pay double under the new system compared to the current one
"But this is the stat that people need to understand. Currently, on the current system, the state pays 44p in the pound and the student pays 56p in the pound on average. Under the new system, the state will pay 19p in the pound and the student or graduate will pay 81p in the pound on average.
"Now on my calculations, what this means is, in truth, many graduates will pay double under the new system, what they do under the current system.
"We are basically moving money out of the taxpayer funding education, and the individual will contribute a lot more, which is what will work in practice as a 9% graduate tax above earnings of £25,000 for 40 years for most people."