Student loan terms to be made clearer in England
Changes will spell out that governments can change rules and that career choices affect repayments.
From September 2012 to July 2023, the UK government issued student loans, known as Plan 2 loans, to English university applicants. These loans carry an interest rate equal to the Retail Prices Index (RPI) inflation measure plus up to 3% based on income, and repayment is calculated as 9% of earnings exceeding a certain threshold which is intended to increase with inflation annually.
The loans are considered paid off after 30 years. However, campaigners argue that the interest rate and repayment rate should be lower, and the government should reconsider its decision to freeze the repayment threshold at £29,385 for three years in England, as it leads to higher repayments as the threshold does not keep pace with inflation.
Ministers have acknowledged the need to make information about student loans clearer for applicants in England. They have agreed to make it more evident that government regulations may be altered by Parliament, and to provide more information on how different career choices could affect repayment schedules, such as salary increases, retraining, part-time work, and gaps in employment.
However, they have not yet decided whether they will reverse the repayment threshold freeze. The government has emphasized they will continue to reassess the entire student finance system. The Student Loans Company is working alongside the government to deliver clear, relatable information to students about their loans.
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