FEE STING
Martin Lewis gives verdict on student loan change that will affect millions
Tuition fees will rise in line with the Retail Price Index of inflation from April 2025
MARTIN Lewis has weighed in on a huge change to university fees that will impact millions of students.
Yesterday, the government announced that the annual cost of an undergraduate degree will increase from £9,250 to £9,535.
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The current tuition fee cap of £9,250 has remained unchanged since 2017.
However, come next April, tuition fees will increase by 3.1%, aligning with the Retail Price Index measure of inflation.
This change will affect both new and continuing students from England and Wales starting in the 2025/26 academic year.
Despite this change, Martin Lewis has explained that the tuition fee hike is unlikely to alter the annual repayment amounts for most graduates.
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The founder of MoneySavingExpert.com said: Higher tuition fees won't change what most pay each year.
"For most, they're paid for you by the Student Loans Company and you repay afterwards only if you earn over the threshold.
"The amount you repay each year (9% over the threshold) solely depends on what you earn, not on what you borrow."
Martin added that the increase in tuition fees will primarily impact those who repay their loans in full before the 40-year repayment period ends, at which point any remaining debt is written off.
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He said: "This generally applies to mid-high to higher-earning university graduates, meaning that the financial burden of higher tuition fees will largely fall on the more affluent."
This means that the fee hike will unlikely affect those on the lowest incomes.
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MAINTENANCE LOANS RISING
In addition to tuition fee loans, students can also receive a maintenance loan worth up to £13,348 to help with everyday living costs.
To support students from lower-income backgrounds, the maximum maintenance loans intended to cover living expenses will also increase from £13,348 to £13,762 next April.
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Martin Lewis
Again, this change applies to both students starting or continuing an undergraduate course from the next academic year.
Martin Lewis welcomed the news but argued that it does not go far enough.
He said: "Thankfully, maintenance loans will rise with inflation (3.1%).
"It won't catch up to the many substantially lower than inflation rises in previous years, but it's better than nowt."
MAXIMUM MAINTANCE LOANS
THE maintenance loan you qualify for is determined by your household income at the time of application, as well as whether you will be studying from home or away.
Here's how the maximum borrowing rates will be adjusted starting April 2025:
- Studying at home (outside of London): Up from £8,610 to £8,877 a year (a £267 increase)
- Studying away from home (in London): Up from £13,348 to £13,762 a year (a £414 increase)
- Studying away from home (outside of London): Up from £10,227 to £10,544 a year (a £317 increase)
- Studying abroad as part of a UK course: Up from £11,713 to £12,076 a year (a £363 increase).
How do tuition fees work?
Tuition fees are usually covered by a tuition fee loan from Student Finance.
This loan is paid directly to the university or college on your behalf.
Repayments start from the first April after you finish or leave your course, but only if your income exceeds a certain threshold.
You repay 9% of your income above the repayment threshold.
This means that the majority or basic-rate taxpayers lose 37p for every £1 they earn above the threshold - 20p as income tax, 8p as national insurance and 9p for a student loan.
Your repayment threshold will vary depending on when you studied at University.
Interest is charged on your loan from the day you receive the first payment until it is repaid in full.
However, it's important to note that any remaining debt can be written off after a set number of years, even if you haven't repaid the total amount.
How have student loan repayments changed?
STUDENT loan repayments are based on your earnings and not the size of the debt.
However, when you start making repayments or when your student loan amount is written off will depend on when you went to University.
Plan 1 - 1998-2012
If you took out a student loan between 1998 and 2012, you'll be bound by the Plan 1 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £24,990 a year.
You'll pay 9 per cent back once your salary breaches this threshold.
The interest rate charged on these loans is based on either RPI or the Bank of England rate - whichever is lower - plus one percentage point.
These loans are written off after 25 years.
Plan 2 - 2012-2023
If you took out a student loan between 1998 and 2012, you'll be bound by the Plan 2 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £27,295 a year.
You'll pay 9 per cent back once your salary breaches this threshold.
The interest rate charged on these loans is based on RPI plus up to three percentage points - dependant on your income.
These loans are written off after 30 years.
Plan 5 - 2023-present
If you took out a student loan from 2023 onwards, you'll be bound by the Plan 5 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £25,000 a year.
You'll pay 9 per cent back once your salary breaches this threshold.
The interest rate charged on these loans is based on RPI only.
These loans are written off after 40 years.
How do maintenance loans work?
In addition to tuition fee loans, students can also receive a maintenance loan to help with everyday living costs.
Like a tuition fee loan, maintenance loans must be repaid following the same repayment rules outlined above.
The amount you are eligible for is influenced by your household income during the application process, as well as whether you will be studying at home or away.
A maintenance loan is paid directly into your bank account at the beginning of each term.
This means typically, you'll receive three payments a year.
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The loan is meant to cover your living costs during your studies, and most people use it to pay rent.
You won't need to use this money on your tuition because that is paid for separately.
Check for student loan overpayments
MILLIONS of people who went to university have overpaid their student loan and could be due money back.
It's not just recent graduates affected, and many could now be in their 30s and 40s.
You're only supposed to start paying back your loan once you earn above a certain amount.
This amount depends on when you started your course, and thresholds have increased over the years as average salaries have risen.
However, many graduates have been caught out repaying loans even though their earnings weren't high enough.
Repayments are automatically taken through work payroll systems – usually when monthly income suggests that yearly salary will be over the threshold.
But if you earn more in a month – because of bonuses, overtime or irregular hours – it can wrongly trigger repayments.
Other system errors might also have meant you overpaid.
You shouldn't have any payments taken until April after you've graduated, even if you’re over the earnings threshold, but mistakes can occur.
You might also have been put on the wrong loan repayment plan or had money deducted after you've paid off your loan.
Dig out your payslips to check if you're owed a refund on some of your student loan repayments.
Then, check your total annual income and look at when your loan repayments started in case they began too soon.
You can also cross-check this information with your paper statements from the Student Loan Company online.
If you're due a refund, you can complete an online request form on the government website.
Find out more by visiting www.gov.uk/repaying-your-student-loan/getting-a-refund.
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