seven things you need to know about your 6.3pc student loan

Linda J. Dodson

From April 6 2021 till April 5 2022 the repayment threshold for new graduates will become £27,295, which means they will pay back almost £100 less a year. If you don’t earn more than the threshold, you will pay nothing.

The increase in the repayment trigger was introduced after plans to freeze it proved too controversial. It was revealed by this newspaper that ministers had been put under pressure to increase the threshold and link it to inflation or earnings.

2. The 30-year cut off

Any remaining debt left at 30 years is, under the current system, wiped.

However, the repayment rate and threshold will dictate how much you pay over those 30 years.

Additionally, the interest charged on the loan could make the difference between paying it all off before 30 years, and having a debt balance left at the end. 

3. How the interest rate works

The interest rate works on a sliding scale, ranging from RPI (retail price index), a measure of inflation, to RPI plus 3 percentage points, meaning it is currently 6.3pc.

The scale is dictated by earnings. Those earning under the relevant repayment earnings threshold, so £26,575 for current graduates, which has risen to £27, 295 since April 2021, will be charged RPI only. The rate increases to RPI plus 3pc for those earning more than £49,130 from April.

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