Student loan thresholds have changed this year, meaning you have to earn more before you start paying back what you have borrowed.
While this means some graduates will pay slightly less each month, it could also mean that the total cost of borrowing will rise.
Here’s we explain what’s changing and what it means for you…
What are the new thresholds?
You must start paying back your loans from the April after you leave university as long as you meet the earnings threshold.
These thresholds vary depending on what loan plan you are on – you can check which one you’re on here.
From this month, the thresholds for Plan 1, 2, and 4 are increasing by 4.3%.
Here are the new rates…
How much do you repay?
Once your salary exceeds the threshold, you will repay 9% of any income over the limit for Plans 1, 2, 4 and 5 and 6% for postgraduate loans.
Here’s an example to help:
If you are on Plan 1 and earn £32,000 a year, you will have to pay 9% on £5,935, which works out at around £534 a year or £44.50 a month.
Under the previous threshold, you would have paid around £52 a month.
You make your repayments through the PAYE tax system, meaning they are automatically taken from your salary before you are paid.
They can vary each month if you earn more over a particular period, such as if you receive a bonus or overtime pay.
Don’t forget about interest
You are charged interest on all your student loans, which is why higher payment thresholds can mean the cost of borrowing increases.
The longer you have your loan, the more interest you will have to pay.
The interest rate you pay is set annually in September using the Retail Price Index inflation figures from the previous March.
It is currently set at 4.3% but it will be reviewed again on 1 September based on data we will get next Thursday.
However, some loan plans face higher rates – here’s what they are…
For many people, high interest rates mean they now owe more than they have ever borrowed.
If you don’t end up repaying your loan, the remaining balance is eventually written off.
If you are on Plan 1, this happens 25 years after the April you were first expected to repay.
For those on Plan 2 and 4 or a postgraduate loan, this happens 30 years after, and those on Plan 5 will see it wiped off after 40 years.