10 May Government increases annual salary threshold for paying back loans
The annual salary threshold has risen from £21,000 to £25,000 for graduates paying back their student loans, reports Emma Parker
(Government increases salary threshold. Credit: Pexels)
Last Autumn, Prime Minister Theresa May announced new plans to increase the threshold for graduates by £4000 for each annual salary. The move came into full effect on the 6th of April this year, being the 
biggest change to student finance since 2012. The threshold is now at £25,000, whereas before it was at £21,000.
Lee Smith is one of many that had previously been paying back his student loan each month, but no longer has to due to the governments new move. However, despite the change seeming beneficial for some, Smith is not convinced: “of course it seems good now and I am saving a few hundred pound a year, but the interest rates is the real worry. More and more money will be adding on to the debt, more than I will be paying back”.
Smith graduated university with debt up to £50,000, and with an interest rate of 6.1% the debt keeps on increasing – even though he has been paying it back. He went on to say: “I guess the only positive thing is the fact the debt is gone in 30 year’s. But, until then, if I get a higher paying job in the future it means I’ll have to pay more money back than I originally already owned”.
According to The Department of Education, approximately 600,000 graduates will be benefitting this year alone and will save graduates roughly £360 a year. Taking into account loans are written off after the 30 year period, some graduates could be saving up to £24,000. Nonetheless, the move will not benefit people who earn a higher salary due to them still having to pay.
The UK Student Loans Company states: “student loans will be written off if you don’t repay them within a certain amount of time, as long as you are not in arrears. The timescales for the write off varies depending
on which country provided the loan”. The company advises students to keep in touch as they will send important information regarding your loan and how much you have already repaid in the tax year.
Many students all over the country share the same worries as Smith, yet some students are delighted with the news. Charlie Clayton, current university student at East London University, claims he is relieved with the governments new move: “my parents were sceptical about the debt I was going to get in through university, especially considering in their day it was free. But now, I think the government are understanding the money we pay is absurd and are trying to make it easier”. Only being in his first year at university, he also has high hopes for the future: “hopefully by the time I am earning more than £25,000 the government will have a new plan again, but I think what we are all hoping for is fees being scrapped altogether”.
For those who started university between 1998 – 2001, the jump has gone from £17,775 to £18,330 – signalling little change. For those who started before 1998, there is no change at all due to an entirely different system.
Whether or not the new system will work successfully is not yet known, but what’s clear is that the system isn’t equal for everyone. Nevertheless, the move could be seen as a step in the right direction as more students will be saving money and it will also be encouraging people to apply to university who were once apprehensive due to debt.
Former students can check what they will owe due to their loan here.
