Thousands of recent graduates across the UK will have their student loan repayment suspended today, as the threshold for paying back student loans has risen from annual salaries of £21,000 to £25,000.
The change will affect students in England and Wales who have taken out loans since September 2012, when tuition fees in England were increased to £9,000 a year.
The move was announced by Theresa May last autumn, and will take effect from now onwards.
It is thought that the change will save graduates up to around £360 a year. Roughly 600,000 graduates will benefit over this coming financial year alone, according to The Department of Education.
For some graduates this could result in savings of up to £24,000, given that any outstanding debts on the loan are written off by the government after a 30-year period.
The repayments of graduates earning over £25,000 will also be lowered, as the percentage of salary paid back will be on a smaller amount, meaning that graduates with an annual salary of up to £40,000 will repay around £30 less a month.
IFS economist Laura van der Erve said: “Overall, repayments will fall by around £10,000 for the average graduate as a result of the threshold increase.
“This will significantly increase the long-run cost to the government of providing higher education. The long-run cost to the government will increase by more than £2bn a year, an increase of nearly 40%.
“The move will come as a welcome relief to lower-earning graduates. Yet NUS vice-president for higher education Amatey Dok warns that the Prime Minister’s change to loans payback does not address the issue of living costs. He told the BBC “students from the lowest income families accrue £57,000 of debt, compared to £42,000 for their more privileged peers.”
Employers will calculate repayments, meaning that graduates living in the UK do not have to take any action in order to receive their savings.
Photograph: Gordon Griffiths via Wikimedia Commons