Are you wondering about student loan changes 2023? Well, you’d be right to as the government is bringing in changes to student finance England. For anyone starting university in September 2023, it would be a good idea to familiarise yourself with these changes.
Here at Developing a Student, we’ve done all the research so you don’t have to. So, pop the kettle on, grab a pen and paper, and read through this carefully.
How Are Student Loans Changing?
As of the 1st of August 2023, Student Finance in England 2023 has changed as the new Plan 5’ terms came into effect.
So, what does this mean? Well, for courses starting on or after the 1st of August, you’ll be on Plan 5 if:
- you’re studying an undergraduate course
- you’re studying a Postgraduate Certificate of Education (PGCE)
- you take out an Advanced Learner Loan
For those studying a postgraduate Master’s or doctoral course, you’ll be on a Postgraduate Loan Plan.
If you take out a Higher Education Short Course Loan or are continuing a course, you’ll remain on Plan 2.
Keep in mind that the first repayment will be no earlier than the 2026/27 tax year.
To confirm what repayment plan you are on, you can sign into your online repayment account.
The following main changes will take place:
1. You’ll begin repaying your student loan sooner
Until now, you didn’t need to begin repayment of your student loans until you earned an annual salary of £27,295 per year. However, under the new changes brought in by Student Finance England, you’ll now have to start repaying your student loans when you earn over £480 a week, £2,083 a month or £25,000 a year – before tax and other deductions.
This will result in graduates paying off their student loans earlier in their careers, possibly even as soon as they find their first graduate job. However, if you earn less than £25,000 in your first graduate job, you won’t be expected to start repaying your student loan. Keep in mind that the more you earn, the higher your monthly repayments will be.
For further information on your repayments, visit the gov.uk page on repaying your student loan.
2. You’ll be repaying your student loan for longer
Another change that’s been made to Student Finance England is the amount of time you’ll be expected to pay off your student loan.
Previously, the period you had to pay off your student finance loan in England was 30 years from the date of graduation. That meant that if you hadn’t paid off your student loan in 30 years, the debt was erased and you no longer had to pay.
However, under the new system, this repayment period is being extended to 40 years. This means workers could be paying off their student loans for another decade, or until retirement age. As a result, people who earn low to mid-level salaries will be more affected. Conversely, higher earners will be able to pay off their student loans more quickly.
3. You’ll be paying lower interest rates
However, it’s not all bad news under the new system. On a more positive note, you’ll be paying lower interest rates on your student loan debt.
Interest rates on student loans are only added when the first repayment is made. The interest then continues until the loan is paid back in full. However, you only pay 9% of the amount above the threshold (£25,000).
So, for example, if you earn £28,000 in your first graduate job (£3,000 above the threshold), you’ll pay tax on 9% of £3,000, which is £270 per year (or £22.50 per month).
Check out the table below for an idea of what your monthly repayments could look like:
| Annual Salary | Plan 5 Monthly Repayments (6th April 2026 – 5th April 2027) |
| £25,000 | £0 |
| £30,000 | £38 |
| £35,000 | £75 |
| £40,000 | £113 |
| £45,000 | £150 |
| £50,000 | £188 |
Regarding the £25,000 threshold, it has been frozen until 2027 when it is “planned” to increase again due to inflation.
How Big Will My Student Loan Be?
If you’re starting university in September 2023, the full maintenance loan for living costs will be:
- up to £8,400 if you are living at home
- up to £9,978 if you are away from home outside London
- up to £13,022 if you are away from home in London
These are means-tested based on your “household income” and are the maximum amounts you can get. If the household income, i.e. your parents’ income, is under £25,000, you will get the full loan. If they earn over £25,000, the loan will decrease. Therefore, the higher the household income, the smaller the loan you can get.
On top of your maintenance loan, you must also take into account your tuition fees which are frozen for 2 years at £9,250.
So, an average yearly student loan could total as much as £22,272 (£13,022 + £9,250) which must be paid back.
What Happens If I Move Abroad?
There’s an urban myth circulating that says that if you move abroad, you no longer have to pay your student loan fees. This is a myth.
While there are no fees involved in taking out a student loan, penalty charges will kick in if you try to avoid paying it. So, if you move abroad, you are still liable for paying your student loans. Be under no illusion; Student Finance will find you and make you pay.
Our advice here is to keep the lines of communication open with Student Finance about your situation. Tell them what your plans are before you leave the country and for how long you’ll be abroad. Because of differences in living costs, the repayment threshold that Student Finance applies in another country could be different from the UK threshold.
Student Loan Changes 2023: Key Takeaways
In summary, student loan changes 2023 will have a significant impact on undergraduate and PGCE students. While lower interest rates are a positive, the earlier repayment threshold, longer repayment period, and potential for larger loan amounts mean graduates will be paying back their loans for longer.
It’s important for prospective and current students to understand how these changes could affect their finances after university. Considering tuition fees, maintenance loans, and interest charges, graduates could be facing over £20,000 in student loan debt. Indeed, careful budgeting and financial planning will be essential to managing this debt in the long term.
For further advice and support for students and graduates, Developing a Student is here to help.
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