Student Finance England Changes 2023: The Truth

For students starting university in England in September 2023 student finance has seen some big changes. We've put together the important bits to know, reassuring you that the changes are nothing to worry about.

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Student finance is changing! Here’s what you need to know.

Student finance is arguably the most stressful part of the administrative process associated with starting university. However, with the last changes made way back in 2012, schools and colleges were well versed in what support students can get and how to get it. 
This is all set to change with the recent announcement that student finance for current year 12’s (those starting university in September 2023) will utilise a different system. Whilst the media has made the new changes seem scary, they’re still nothing to worry about and shouldn’t be a deterrent for attending university. 

So what are the key changes?

The period that loans are written off is extending from 30 years to 40 years.

According to the Institute for Fiscal Studies 70% of students will repay their loans under the new changes compared to just 25% that currently repay their debts in full. 

Under the new rules, students will have 10 more years before their debt is written off in which they will have to continue paying the loan repayments. 

The first repayment salary threshold is dropping from £27,295 to £25,000

Previously, students needed to earn £27,295 before starting to pay back their student loan, however, this threshold will drop to £25,000. 
Despite this drop, repayments will consist of only a small percentage of earnings above this threshold. The government has expressed that someone earning £26,000 will only pay back an extra £2 per month than those under the old terms.

This threshold will also be fixed until 2026 and wont be reduced further during this time. Whilst some have criticised the reforms stating that it will affect lower earners more, the threshold is still higher than the average salary of graduates, meaning students won’t be repaying their loan until they have been in work for a while and are out of short term debt (student overdrafts).

The interest rate will be reduced

This will only be added at the rate of inflation, meaning that students will only repay what they have borrowed in real terms. 

The rate of inflation will be calculated using the retail price index (RPI). This is less than what is currently added to student loans (RPI + up to 3% which will increase after students have completed their studies dependent on earnings).

Tuition fees will be frozen 

Universities wont be allowed to increase tuition fees until 2025. The government has stated that the combined reduced interest and tuition fee freeze will reduce the amount of total debt for a student on a 3 year course by up to £6,500. 

Why it shouldn’t affect students when deciding whether to attend university

Student loans are still more beneficial then commercial loans

Having a student loan will not go against you when applying for credit. For mortgages, this will only be taken into account as an outgoing which therefore makes your potential mortgage payments smaller. However as previously stated, this increase in outgoing is minimal. 

Moreover, should you find yourself unemployed or your salary drops below the £25,000 threshold, then you won’t have to make repayments on your student loan until you are employed again or earn over £25,000. 

University is still a good investment

According to the government, in 2020 graduates earned on average £6,500 more than their non-graduate peers.

The facts

  • Students won’t repay more dur to fee freezes and a reduction in interest.
  • Low earners will still be protected – If you earn under £25,000 or are unemployed then payments will be paused.
  • The period that loans are written off is extending from 30 years to 40 years.
  • The first repayment salary threshold is dropping from £27,295 to £25,000.
  • The interest rate will be reduced to that of RPI (inflation).
  • Tuition fees will be frozen. 

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