A new regulation which will see the repayment threshold for post-2012 student loans raised to 25,000/year and then increase annually in line with changes to average earnings will come into force next month.

The Government is making a number of amendments to how university leavers repay their loans, and while the key changes were first announced by the Prime Minister last October following a long-running MoneySavingExpert.com campaign, this week is the first time we've seen the detail of the plans as they will be set out in law.

The changes are laid out in what's known in parliamentary jargon as a 'statutory instrument', which allows regulations to be put into law without the need for an Act of Parliament to be passed. The deep breath Education (Student Loans) (Repayment) (Amendment) Regulations 2018 will officially come into law on 6 April.

For full help on how repayments work, see our Student Loans Mythbusting guide.

Martin Lewis
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This is just one of many public service and utility price hikes due to hit:

- Stamps... first & second class will rise by 2p on 26 March buy early to save.
- Passports... online application costs go up by 3 from 27 March beat the hike.
- Prescriptions... climb to 8.80 on 1 April in England see cheap medicines help.
- Council tax... bills increase on 1 April, yet some overpay challenge your tax band.
- TV licences... standard licence costs will rise by 3.50 can you legally ditch yours?
- Water bills... are going up by an average 9 on 1 April cut your water bills.
- Dental charges... check-up costs will go up from 1 April can dental insurance help?

How are the student loan repayment rules changing?

Here's a summary of exactly what's happening from 6 April:

  • Started uni in or after 2012 and from England or Wales? Your repayment threshold is rising to 25,000/yr so many will pay LESS back each month. The repayment threshold the amount graduates can earn before making repayments will rise from 21,000/yr to 25,000/yr from 6 April for those with 'Plan 2 loans', ie, those who started uni in or after 2012 and are from England or Wales.

    You pay back 9% of the amount you earn each year which is over the repayment threshold. For example, currently if you earn 26,000/yr you'll be paying back 9% of 5,000, so 450. From April, you'll repay 9% of 1,000, so just 90 a year.
  • The repayment threshold will change each year based on how average earnings change and if earnings FALL, the threshold could too. The repayment threshold won't stay at 25,000/yr it will be adjusted annually in line with changes in average earnings, based on data from the Office for National Statistics. We knew this was happening however, we now also have confirmation that in the unlikely event average earnings go DOWN, the repayment threshold will too... in which case you'd repay more.
  • The thresholds for interest will also be rising - so some will accrue LESS interest. Student loan interest rates are based on the Retail Prices Index measure of inflation (the rate at which prices rise). While studying, until the April following graduation, you're charged RPI + 3%. After that, it depends on your annual earnings and the thresholds for this are changing from 6 April.

    • Currently the interest rate is RPI if you earn under 21,000/yr. From 6 April, it will be RPI if you earn under 25,000/yr.
    • Currently the interest rate is RPI + 3% if you earn over 41,000/yr or more. From 6 April, it will be RPI + 3% if you earn 45,000/yr or more.
    • Between the lower and upper thresholds, the interest rises gradually from RPI to RPI + 3%. For example, currently if you earn 31,000/yr your rate will be RPI + 1.5%, though since the thresholds are rising, that rate will drop somewhat from 6 April.
  • Started uni between 1998 and 2012, or at any time and from Scotland or Northern Ireland? Your repayment threshold is rising to 18,330. The repayment threshold the amount graduates can earn before making repayments will rise from 17,775/yr to 18,330/yr from 6 April for those with 'Plan 1 loans'. You pay back 9% of the amount you earn each year which is over the repayment threshold so currently if you earn 18,430/yr, you'll currently repay 58.95, but from April, you'll repay just 9 a year.
  • If you have a 'Plan 1' and a 'Plan 2' loan and earn more than 21,000/yr, MORE of what you repay will go towards the 'Plan 1' loan. OK, here's where it gets really technical...

    If you started uni in or after 2012 and are from England or Wales, you'll have a Plan 2 loan. If you started uni between 1998 and 2012, or since 2012 and you're from Scotland or Northern Ireland, you'll have a Plan 1 loan. Some people however have BOTH this might be the case for example if you are English, completed a year of university back in 2009, then dropped out and started a new course in 2013.

    The repayment threshold for Plan 1 loans is 17,775/yr and for Plan 2 loans it's 21,000/yr currently (rising to 25,000/yr next month). So:

    • Right now if you earn more than 21,000/yr your repayment is spread across your Plan 1 and Plan 2 loans. You pay 9% of everything you earn between 17,775 and 21,000 towards your Plan 1 loan, and 9% of everything you earn over 21,000 towards your Plan 2 loan.
    • From 6 April, when the repayment thresholds increase, you'll pay 9% of everything you earn between 18,330/yr and 25,000/yr towards your Plan 1 loan, and 9% of everything you earn over 25,000/yr towards your Plan 2 loan.
    • What this means in practice is that if you earn more than 21,000/yr, while the total amount you repay each month won't change, more of what you repay will go towards your Plan 1 loan.
    • As Plan 1 loans have a lower level of interest than Plan 2 loans, this COULD mean you end up having to repay more overall though remember, most won't ever finish repaying the full amount before the loan's wiped.
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