A money-saving expert has issued a stern warning to all students who have outstanding student loans to pay off, in line with the government’s debt plans.
ITV’s Martin Lewis has warned those who started their studies from 2012, after the government announced a plan to freeze the student loan repayment threshold – the income level at which loans will start to be repaid by borrowers.
And while ‘freezing’ terminology generally sounds good, Martin revealed most graduates will lose around £110 each year – reports the Liverpool Echo.
Go here for the very latest breaking news from across the North East
The current loan repayment threshold is £27,295 and those with student loans will repay 9% of anything over that threshold.
Next year, however, the threshold will rise to £28,550, an increase of 4.6%.
Because the majority of people don’t repay their student loans in full, paying 9% of anything over the threshold for 30 years, before any remaining debt is cleared, most graduates will be made worse by the freeze.
An estimated 17% – the highest earners – repay their student loans in full.
Thus, as long as the threshold is raised, these people will repay less.
Everyone else will lose an extra £110 each year, paying off far more than they would have made in total.
Martin said, “Higher-earning graduates will benefit, and low- and middle-income people will pay more.”
The freeze, if implemented, represents a break with the previous policy made by the government in 2010, then reiterated in 2017 by former Prime Minister Theresa May, under which the reimbursement threshold would be raised each year” in line with average annual revenue growth”. .
The change will affect all students and graduates in England and Wales who started university from 2012 and took out a loan.
For the latest What’s On news, announcements and reviews straight to your inbox, head here to sign up for our free newsletter