What is the student loan repayment threshold?
When are your student loan payments due to be paid? (Picture: Getty)

Many English and Welsh students heading off to university will have to take out hefty student loans.

While getting that first payment into your bank account feels like an unbelievable dream, eventually university ends, the workforce beckons – and so do the Student Loans Company, wanting their money back.

Usually, you don’t start paying for your tuition and maintenance loans until your degree has, in effect, starting ‘paying off’ – and you’re earning over a certain salary each year.

A Financial Times report has revealed that Chancellor Rishi Sunak plans to lower this threshold in next month’s budget, though – meaning recent graduates could be paying off loans much earlier in their career.

So, what’s the current threshold, and what will any changes mean for you personally?

Here’s what you need to know.

What is the threshold for student loan repayments?

The University of Liverpool Victoria Building
Did you go to university in the UK? Here’s what you need to know (Picture: Getty)

Currently, there are two main types of student loan repayment in England and Wales.

What you need to earn before repayments are automatically taken from your paycheque depends on which plan you’re on.

English and Welsh students who began their UK course before September 1, 2012 are on Plan 1 – as are Northern Irish students who began studying in the UK from September 1998 onwards.

People on Plan 1 start paying their loan off when their earnings reach £19,895 before tax.

When university fees rose from around £3,000 per year to £9,000 per year, so did the threshold for paying them off.

So, English and Welsh graduates who began their UK course after September 1, 2012 are on Plan 2 – and begin paying back their student loads once they’re earning £27,295 before tax.

Bundles and Piles of UK Banknotes
When do you start paying back student loans? (Picture: Getty)

Scottish students who began a course after September 1, 1998 are on what’s called Plan 4. They don’t start paying back loans until they’re earning a pre-tax salary of £25,000.

Anyone with a postgraduate or doctoral loan – to earn their Master’s or PHD – will start paying it back when they’re earning above £21,000 before tax.

If you’re not sure where you fall, there’s further information available on gov.uk.

What will the future student loan repayment threshold be?

Right now, there is no set number confirmed by the government.

A £2,000 cut in the threshold has been floated around, meaning graduates would pay back after earning £25,000 pre-tax.

It’s been suggested by the Augar Review – which examines the state of adult education – that the threshold should be dropped to £23,000.

University student working in library
Student loan payments are great… but then you have to pay them back (Picture: Getty)

A £20,000 threshold has also been floated, but the Financial Times reports that one minister called this ‘too low’.

What’s been revealed so far seems to suggest it is those on Plan 2 will be most impacted by the threshold change – as Plan 1’s threshold is already under all of those figures (because tuition was, on the whole, cheaper before 2012).

However, we’ll need to wait until Rishi Sunak’s budget is unveiled before any concrete conclusions can be drawn.

When will your student loan be written off?

Given the national insurance rise, the current energy crisis hiking up bills, and the Universal Credit cut – you’d be forgiven for thinking your financial future looks bleak.

Don’t fret too much, though, at least about your student loans. They’ll be written off after a certain period of time passes.

Pound coins and bank notes
Your loan will eventually be written off (Picture: Getty)

On Plan 1, those who took our their loans before 2006 will have the loan completely cancelled when they reach age 65.

While those who took it out after, will have it written off 25 years after the first April they were due to repay.

Meanwhile, Plan 2 graduates can wave goodbye to the remainders of their loans 30 years after their first April repayment.

Plan 4 and postgraduate loans are written off after 30 years too. Find out more on gov.uk.

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