Student record

When will my student loan be cancelled?

Student loan interest rates are rising because they are linked to RPI inflation – a metric that shows the cost of living in the UK has skyrocketed

Student loan interest rates for new graduates are expected to skyrocket from September (Image: Getty Images)

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From September, increases of up to 12% could be considered for those who have gone to university since 2012 – although there is no change in the rate of reimbursement of their monthly salary.

A good thing for those who have been affected is that they will not necessarily have to repay their entire loan.

The taxpayer eventually writes off all student loans – although when this happens differs depending on when you studied (Image: Getty Images)

So when are student loans written off – and how will they change under new government plans?

Here’s what you need to know.

How could student loan interest rates change?

English or Welsh people who have studied at university since 2012 have had to take out student loans to cover their tuition fees and living expenses.

Interest is added to student loans during and after a student’s course – although what you repay on earnings above the lower threshold of £27,295 is set at 9%.

Thus, the interest increases the size of the student debt, while the repayments will always remain at the same rate.

While the interest rate for students currently studying to graduate is 4.1%, those who have graduated are seeing their interest rates set by the March RPI plus up to 3% (in based on their income) for the academic year – i.e. September to August.

Changing student loan interest rates are more likely to affect higher-earning graduates (Image: Getty Images)

Interest is added to student debt even if they earn below the repayment threshold of £27,295.

Here’s how interest rates differ depending on what you earn:

  • £27,295 or less (current RPI rate – 1.5%)
  • £27,296 to £49,130 ​​(RPI rate plus up to 3%)
  • Over £49,130 ​​(RPI rate plus 3%)

However, given that the RPI for March 2022 hit an all-time high of 9%, the lowest earning graduates will see their interest rate increase sixfold while the highest earning are expected to face an interest rate of 12. % from September 2022.

Unless the government intervenes, this rate will only apply for six months due to a law which means student loan interest rates cannot exceed commercial unsecured loans on the High Street.

This will still mean that high-income graduates with a typical loan balance of £50,000 will see an additional £3,000 of interest added to their debt.

According to the Institute for Fiscal Studies (IFS), this means that rates are expected to fall to around 7% by March 2023 before fluctuating between 7% and 9% for 18 months until September 2024, when they will drop. at 0% for six months. .

The IFS estimates that they will then rise to around 5% by September 2025.

When are student loans forgiven?

While fluctuating interest rates shift the targets for the highest earning graduates, they are unlikely to change things for those with low to middle incomes, given that student loans issued since September 2012 are forgiven. by the government 30 years after the start of repayments.

If you are a graduate, your first reimbursements will come out of your payslip from the following April.

So, if you finished your studies at 21, you will pay off your student debt until you are 51 or 52 years old.

Higher-earning graduates are more likely to finish paying off their student loans before the deadline.

For students who took out loans before the 2006/07 academic year, your student loan will be canceled once you reach the age of 65.

For those who took them out between the 2006/07 and 2011/12 academic years, the limit is 25 years after your repayments start in April.

Under upcoming rules for those studying from September 2023, loans will be canceled 40 years after repayments start.

But because the government has announced a lower repayment threshold of £25,000 for these future graduates, it means former students on low to middle incomes are paying more for their student loans for longer.