Under a new plans introduced earlier this month, millions of UK university graduates will repay less per year towards their student loans.
From 6th April, the annual earning threshold below which a graduate does not have to repay their student loan, has increased. The amount the threshold will increase depends on where you studied and how long ago you took out the loan.
For those who started university after 2012, the threshold has gone up from £21,000 to £25,000. If you attended university between 1998-2011 or if you began your studies in Scotland or Northern Ireland after 2012, the threshold has gone up from £17,775 £ to £18,330.
For all earnings over these annual thresholds, graduates are required to repay nine per cent towards their student debt.
As it stands 83 per cent of graduates will not be able to pay their loan back within 30 years. After this time the loan is written off by the government. For the 83 per cent this effectively makes the student loan system a graduate tax.
Whether a graduate will be able to clear the debt within 30 years depends on how much you owe the government and how the interest rate changes.
Due to the changes, graduates earning over £21,000 will save up £360 yearly compared to previously. This will add up to a total £10,800 saved over the thirty year student loan period.
This restructuring of student loans will not affect postgraduate students: as a postgraduate, you will repay the 6% after earning above 21,000 £ per year.
If you live outside the UK, your threshold will be calculated based on the living costs of the country you live in.
If you started studying before 1998 and you earn less than a set threshold, you can defer paying your loan. The set threshold is currently £29,219 per year but it changes every September on the basis of average earnings.