The amount at which students will start to pay back their university loans will be lowered from £27,295 to £25,000 for new borrowers.
Commencing from September 2023, the interest rate on student loans will also be set to RPI+0%. In addition, the amount of time that students have to pay their loans back until they can be written off has been extended by a further 10 years – from 30 to 40 years.
The new repayment system will put a more sustainable footing on ensuring that more students are paying back their loans in full, with the hopes that there will be a clampdown on poor-quality university courses that do not benefit graduates in the long term.
Within the existing system, more people than ever are attending university but are building up debt for low-quality courses that do not lead to a graduate job with a reasonable wage. This has resulted in an increasing number of students never being able to pay off their student loan. Currently only 25% of students who have started a full time undergraduate degree in 2020-21 are forecast to pay their loans in full.
As a result the government is taking action to tackle the crisis by setting out major changes to the way students will repay their loans, whilst developing a sustainable system which will guarantee access for all.
To make the new system fair for students the student loan interest rate will now be set at RPI+0% for new borrowers starting courses from 2023-24. This means that graduates will no longer be expected to repay more than they borrowed.
In addition to this university tuition fees have been capped at £9,250 for the next two years and are not expected to rise with inflation, further reducing the real cost to students.
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