The Department for Education has announced structural changes to student loans, including a reduction in the repayment threshold, a longer repayment term, lower interest rates and the stripping out of poor quality courses.

Only a quarter of students who started full-time undergraduate degrees in 2020-21 are forecast to repay their loans in full and at the end of March 2021, £161bn was yet to be paid back in student loans. That figure is forecast to rise to £500bn by 2043.

The shake-up of the student finance system will begin next year and include:

  • A freeze on university course fees: they remain at £9,250 for a further two years.
  • Earning levels at which new borrowers start to repay their loans will be set at £25,000 until 2026-27 (currently £27,295), for those starting courses from September 2023 .
  • The interest rate will be cut to match the Retail Price Index (RPI). Currently, it is RPI plus 3%.
  • The student loan repayment term will also be extended from 30 to 40 years for new borrowers from September 2023.

The government has also published two consultations. The first will seek views on minimum eligibility requirements and stripping out poor-quality, low-cost courses which lead to poor outcomes for students.

The second will set out plans to deliver the Lifelong Loan Entitlement (LLE) worth the equivalent of four years of post-18 education (i.e. £37,000 in today’s fees) to support students to study, train, retrain or upskill at any stage throughout their lives through flexible and modular courses.

Useful guides on this topic

Top Tax FAQs for Students
This is a freeview guide for students including our top tax tips and answering your FAQs.

Students & Tax
There are no special tax rules for students, although there are a few pitfalls to watch out for. A guide for subscribers.

External links

Department of Education: Fairer higher education system for students and taxpayers

Consultation Higher education policy statement and reform

Consultation: Lifelong loan entitlement

Oak ad
Are you enjoying our content? 

Thousands of accountants and advisers and their clients use as their primary TAX resource.

Register with us now to receive our receive our FREE weekly SME Tax News updates.