Student loans: what’s changing in 2023/24?

Plan 5 is a brand new repayment plan for student loans in England. If you’re starting an undergraduate or postgraduate course in England after 1 August 2023, you’ll automatically be under Plan 5.

Note: If you started university before 31 July 2023, or you’re going to be studying in Scotland, Northern Ireland or Wales, you won’t be under Plan 5. Find out what student loan plan you’re on.

Some key changes in Plan 5 include:

• How much you can earn before you start repaying your student loan

• When your first student loan repayment is due

• How much interest you’ll be charged

• When your student loan debt will be cleared

Here’s a rundown of the key changes as part of Plan 5, and how they could impact you if you’re starting a university course this September.

Those under Plan 2 (started a course between 1 September 2012 and 31 July 2023) are expected to start repaying their student loan the April after they finished or left their course. Part-time students are expected to start repaying their student loan either the April after they finish or leave, or the April four years after the start of their course (even if they’re still studying) – whichever comes first.

Under Plan 5, you’re not due to start repaying your student loan until at least April 2026. This is the case even if you leave your course early.

You only have to make repayments to your student loan if you’re earning above an annual threshold. Currently, the threshold for Plan 2 is £27,295 a year.

For those under the new Plan 5, however, the repayment threshold is going down to £25,000 a year. You’ll repay 9% of whatever you earn above this amount towards your student loan. For example, if you earn £26,000 a year, you will pay £90 a year (9% of £1000), whereas if you earn £35,000, you’ll pay £900 a year (9% of £10,000).

It’s important to note, too, that if you hit the monthly threshold (£2,083) or weekly threshold (£480) at any point, you’ll still end up making repayments, even if this is due to a one-off situation like a work bonus. You can get a refund for these at the end of the tax year if you’ve not met the annual threshold of £25,000, but you have to contact the Student Loans Company (SLC) directly for this.

You’ll be charged interest for taking out a student loan. The interest you owe is added over time as you continue to pay off your debt.

Interest rates for student loans are based on the Retail Price Index (RPI), which is a measure of inflation. Under Plan 2, interest rates could be RPI plus up to 3%, whereas under the new Plan 5, interest rates will be set at the RPI only.

This essentially means that you won’t repay more than the amount you initially borrowed in real terms. For example, if you borrowed an amount that could buy you 10 bags of shopping, you’ll pay back an amount that would also buy 10 bags of shopping in the future. It may look like more money in numbers due to inflation, but it works out as the equivalent amount.

This change means that you now have an extra decade of repayments to make. If you have any outstanding student loan debt (including interest) 40 years after you’re due to start making repayments, this will be cleared and you’ll no longer owe anything.

Note: your student loan debt is also cleared if you are deemed permanently unfit for work, or if you die.

It is predicted that just over half of student loans will be cleared in the 40-year period (52%, much higher than the 23% who clear their debt fully under Plan 2). However, it’s likely that most people will be making repayments for the whole 40-year period (46%) before their debt is cleared.

It can seem daunting to think that you might be repaying your student loan debts for the next 40 years, with interest piled on top. However, if you’re earning less, you’ll repay much less, if anything at all. After 40 years, your debt is wiped, no matter how much you still owe. If you’ve not made much of a dent in your student loan debt, it might even work out interest-free!

If you’re a medium-earner, you might find yourself paying the total amount of your original loan plus some interest, but it might still be less than inflation. And if you’re a higher earner, you’re probably in the 54% who will be able to clear your debt in full. Yes, you’re paying interest, but still less than you’d have been paying under Plan 2. And the quicker you’re able to clear it, the less interest you’ll pay, meaning you pay back less in total.

As everyone’s circumstances are different, there’s no definitive answer as to whether taking out a student loan is the best option for you. Instead, perhaps consider the benefits and potential impacts taking out a student loan could have on you personally, and weigh up your options.

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