Becoming a student for the first time involves stepping into a whole new world. So many different situations, processes and places to become familiar with, nearly all of which are vital to giving you the most out of your student experience.

Understanding the student loan repayment threshold is another part of this process, and is incredibly important too. Your student loans and your postgraduate loan will enable you to attend and study at university, but once you’ve left the university, repayment becomes a very real circumstance.

Many students put it to the back of their minds, but the student loan repayment threshold 2022/23 will impact you down the line. Knowing what to expect puts you in the best position possible, so MoneyBright has all the answers you need, including:

  • How do student loans work?
  • What is a student loan repayment threshold?
  • What were the changes to the student loan repayment threshold for 2022?
  • What are the student loan repayment plans?
  • Plan 1 student loans explained
  • Plan 2 student loans explained
  • Plan 4 student loans explained
  • Postgraduate loan repayment plan
  • What happens to your student debt if you move abroad?
  • Should you repay your student loan early?

How Do Student Loans Work?

Student loans are government loan that is designed to support and enable people across the UK to attend university by covering the costs. There are two types of student loans that students can apply for to cover these costs: maintenance loans and tuition loans.

Tuition loans are loan students can take out to pay for the tutoring costs at university and are often paid directly to the university each semester. For undergraduate students, this loan will cover the full cost of the tuition fees every year.

Maintenance loans are separate loan that students can take out to help them pay for living costs such as rent, food and travel. These loans work slightly differently, as the amount a student can take out for their maintenance loan depends on how much their household earns.

Students from lower-income households can take out larger loans, whilst higher income households are restricted in what they can have access to, with the idea that parents and guardians are financially able to cover the rest of the costs. However, this isn’t always the case and if you need extra financial support, you should contact your university to see what support is available.

Postgraduate loans work slightly differently – the two loans are merged and they are not paid directly to the university. Instead, postgraduates receive a loan that is supposed to cover tuition fees and any living costs and the student must pay the university directly from their bank account.

What Is A Student Loan Repayment Threshold?

A student loan repayment threshold is the term used to describe when a person will be contractually required to begin making payments to repay their student loans.

This threshold is determined by the amount the person earns per year, and then they’ll begin paying back a percentage of the earnings above this threshold. For example, if the person earns £100 over the threshold and the percentage owed on these earnings is 9%, the person would pay back £9 that year.

What Were The Changes To The Student Loan Repayment Threshold 2022?

Unfortunately, there are often a lot of changes made to the student loan repayment threshold, and the year 2022 was no different. The changes that were made don’t affect the majority of the loan stipulations, and most importantly, the amount you can borrow has remained the same.

However, the interest rate on your loan amount was changed. The maximum interest rate was reduced by 0.4% to 4.1%, rose back up to 4.5% from the 1st of January 2022, and the changes were applied to Plan 2 loans and postgraduate loans.

Following this, in April 2022, the government announced a freeze on the threshold for Plan 2, meaning more people will have to repay their loans earlier than previously thought.

What Are The Student Loan Repayment Plans?

Student loans are divided into plans to organise based on when they were taken out. The type of plan a person took their loan out under will dictate the threshold for how much they pay back and the interest rates.

Plan 1 Student Loans Explained

The Plan 1 student loans are for English, Welsh and some EU students who started studying as an undergraduate in the UK between the 1st of September 1998 to the 1st of September 2012. It’s also applicable to any Northern Irish people who have studied as an undergraduate since the 1st of September 1998.

The repayment threshold for Plan 1 loans is lower than other plans, with the repayment number placed at £1,657 per month, which amounts to a pre-tax salary of £19,884 before tax. The amount paid once the person begins earning this much money is 9% of any amount over the threshold, and the interest hasn’t changed and remains at 1.1%.

Plan 2 Student Loans Explained

Plan 2 is the student loan plan for English, Welsh and some EU students who studied at an undergraduate level on or after the 1st of September 2012. For those who took out an Advanced Learner Loan, this plan applies if that loan was taken out on or after the 1st of August 2013.

These Plan 2 loans have a repayment threshold of £27,295, with people paying 9% of any earnings made over this threshold. For example, if the person with the Plan 2 loan has a salary that is £100 over the threshold, they’d pay £9 a year.

Plan 4 Student Loans Explained

Plan 4 student loans apply to Scottish students or EU students in Scotland who began their studies in the UK on or after the 1st of September in 1998, whether they were undergraduate or postgraduate.

Postgraduate Loan Repayment Plan

Those who have studied at a postgraduate level, they will have taken out a postgraduate loan.

The postgraduate loan threshold is £21,000 and will require people to pay back 6% of their earnings over this threshold. This applies to English, Welsh and EU students who took out a postgraduate loan on or after the 1st of August 2016, or a postgraduate doctoral loan on or after the 1st of August in 2018.

What Happens To Your Student Debt If You Move Abroad?

Student debt is flexible, especially when you compare it to traditional debt repayments.

However, this flexibility is not a way to get out of paying it off, as penalty charges will be applied if you avoid making the repayments that you owe. So, if you plan on moving abroad and you’re just going to ignore your student loans, it will catch up to you.

Student Finance won’t simply ignore the fact you owe them money, and they go to great efforts to ensure that you are making the repayments that you owe.

Should You Repay Your Student Loan Early?

It’s normal to want to rid yourself of debt, and in any other situation, you’d probably be advised to prioritise paying it off. However, student loan debt is very different.

There are no fees that apply to having student loan debt, and interest is the only thing that will make it build. Whilst this isn’t ideal, it’s unavoidable and not going to affect you financially at the moment.

Student loan repayments are also done automatically from your salary, so you don’t have to worry about missing any payments either. Once 30 years have passed, the debt is then written off too, to no detriment of your credit score.

Due to the lack of fees, automatic payments and a 30-year write-off, repayments aren’t really necessary.

Becoming a student is a steep learning curve, and often filled with experiences and situations that can be quite challenging. Take the edge off and be more educated to get the best outcomes with MoneyBright.

Our expert team has plenty of financial tips for you to check out, from saving and investing information to travel tricks. Looking for even more? Find us online and find even more content on our TikTok!



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