New Student Loans Rules 2023
Published / Last Updated on 18/03/2022
New sets of Student Loan rules starting in 2023 have been announced by the Department for Education for students that started their courses after 1 September 2012.
We may all remember the fall from grace of Nick Clegg (Social Democrat Leader) when tuition fees were introduced, the then Deputy Prime Minister to David Cameron’s coalition Conservative government. Since then, a number of changes have occurred.
2017 – Tuition Fees Cap of £9,250 pa and maintenance grants for low-income families being withdrawn.
2018 – Philip Augur was commissioned to produce an independent review for post age 18 education.
2019 – Augur’s review was published and suggested:
- Freezing tuition fees for 2019/20 and 2020/21 and then to be reduced in 2021/22 to £7,500. Tuition fees then to increased with inflation ongoing.
- Government grants to be reintroduced for low-income families.
- The point when student loans must start to be repaid being reduced from a graduate salary of £25,000 to £23,000 with this new reduced salary to be increased each year with inflation.
New Student Loans Rules 2023
The Department for Education has published revised Student Loan and Tuition fees rules, salary bands and interest rates on 28 January 2022 ready to start in September 2023.
The earnings threshold for when graduates must start repaying their loans set at £27,295 (this is the salary thresholds above after inflation indexation).
Interest rates on debt will be charged at 0% + RPI for those earning above £27,295.
Students earning more than £28,550 will make higher repayments on an escalating scale based upon the more they earn
Finally, where a graduate earns over £49,130, the interest rate charged will be increased 3% + RPI (removing the previous caps). This is more expensive than many standard bank loans and we suggest this is a government move to encourage either earlier, accelerated loan repayment or graduates being encouraged to get a bank loan and move their debt away from government and to a bank. This means more incoming capital/revenue for the government and less exposure to student debt being written off.
The point at which student debt will be written off is increased from 30 years to 40 years meaning that liabilities to student debt could still be in place in your 60s rather than 50s.
Impact
RPI is currently over 7%, so this could hurt when you think that we are all facing minimum 4% workplace contributions, higher energy prices, a 2.5% Health and Social Care levy, ever higher property prices and of course increasing interest rates on our mortgages.
75% of graduates are not higher rate taxpayers and their ability to repay student debt is restricted meaning that they will pay even greater amounts of interest for a longer period of time. It has been estimated that lower paid graduates may end up paying £12,000 to £15,000 more in interest payments.
25% of graduates are higher earners, earning over £50,000 and it is anticipated that this group has a greater ability to repay debt early or refinance to cheaper bank loans. It is estimated that higher earning graduates may save £around £4,000 by paying off debt at a faster rate or refinancing the debt.
