Shocking New Student Loan Rules for 2023: Graduates to Pay Double, Study Reveals

Are you starting your undergraduate degree this September? Brace yourself for a financial shock! New rules are in place for student loans, and they’re hitting this year’s university intake harder than ever before.

Plan 5 Loan: A Game-Changer

The freshly unveiled Plan 5 loan, applicable to students beginning their degrees from August 2023, brings significant changes. Under this plan, graduates will start repaying their student loans once their annual income reaches £25,000.

A Lower Threshold Than Ever

This income threshold is lower than in previous years. Those who embarked on their higher education journey between 2012 and 2022 began repaying their loans when their income reached £27,295.

Longer Loan Lifespans

But that’s not all. This year’s students will also have to bear the weight of student loans for a longer period. The remaining unpaid balance will now be canceled after 40 years, up from the previous 30-year limit.

Financial Burden Doubles for New Graduates

On an average salary of £33,000, just below the national full-time average according to the Office for National Statistics, graduates can now expect to repay a total of £38,800. This is a stark contrast to the £15,120 expected from those on the same salary in previous years, according to Save the Student.

New Plan 5 vs. Old System

If you’re on an average salary, you’ll be parting with £60 a month under the new Plan 5 system. In contrast, students under the old system would pay nearly a third less with the same income. Taking into account the additional 10 years of debt, graduates will end up paying an extra £20,000 on average.

The Financial Impact on Lower Salaries

For those on lower salaries, the financial impact will be even greater. Previously, someone earning £27,500 would repay just £1 a month of their loan, but under Plan 5, this would jump to £18.

Understanding Student Loans

How do student loans actually work? Tuition Fee Loans are transferred directly from the Student Loans Company to the university, while maintenance loans are deposited into the student’s bank account. With tuition fees capped at £9,250 per year, the average student leaves university with about £33,000 in debt.

Repayment Terms and Interest Rates

Starting this year, students will pay 9% of their income each month once they graduate and earn over £25,000. This threshold remains frozen until 2027. Additionally, this year’s interest on the loan is charged at a rate of 7.1%. After 40 years, any remaining balance is wiped clean. However, keep in mind that the loan balance keeps increasing over time.

A Flawed System?

Tom Allingham from Save the Student criticizes the Plan 5 changes as ‘incredibly regressive.’ He points out that while most graduates will pay more, the highest earners may end up paying less than under the old system due to quicker loan clearance and reduced interest.

Government’s Perspective

The Department for Education defends these changes, stating that starting repayments at £25,000 will help maintain a sustainable student finance system, keeping costs down for taxpayers. They also highlight increased support for students in need.

The Pain of Insufficient Maintenance Loans

The financial hardship for students begins before they graduate. Maintenance loans no longer cover living costs in any UK student city, leaving students struggling to make ends meet.

Rising Financial Struggles

According to, there’s a substantial gap of £788 per month between government-provided maintenance loans and students’ actual living costs. NatWest’s Student Living Index reports that nearly half of UK students are running out of money by the end of the semester, a 10% increase from 2022.

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