When does my student loan get written off? Repayment plan cut off dates and UK interest rate rise - explained

University graduates - particularly those on higher salaries - received a boost in August 2022 when the government announced it would cut student loan interest rates back further than initially planned from September 2022.

It means overall student loan balances will not be charged at RPI inflation rates for the next year - the RPI having rocketed in recent months as a result of the cost of living crisis. But the government has also announced changes this year that mean future graduates will have to pay back their loans over a longer period than they do at present.

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

How will 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 costs.

Interest is added to student loans both during and after a student’s course, although it is only added to the overall balance rather than monthly repayments (which are fixed at 9% of taxable income over the threshold of £27,295).

Put simply, interest increases the size of student debt, while repayments fluctuate depending on how much your salary is. The interest rate for students currently studying for their degree sits at 4.1%.

Meanwhile, those who have graduated have their interest rates set by the March RPI plus up to 3% (depending on how much they’re earning) for the academic year - i.e. September to August.

Interest is added to student debt even if they earn below the repayments threshold of £27,295. This is 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%)

The RPI for March 2022 rose to a then-record high of 9%, which meant the lowest earning graduates were set to see their interest rate rise six-fold while the highest earners were going to face an interest rate of 12% from September 2022. These rates would have seen students getting a higher interest rate than mortgage payers and those on unsecured High Street loans.

Higher-earning graduates with a typical loan balance of £50,000 would have accumulated another £3,000 in interest to their debt in just six months. However, the government intervened in June to bring in a cap of 7.3%. This cap was then reduced again in August 2022 to 6.3%.

For those beginning degree courses from September 2023, the student loan system will change as interest rates will only be set by the RPI and no additional percentages will be added.

When do student loans get written off?

While fluctuating interest rates are moving the goalposts for the highest earning graduates, they are unlikely to change things for those on low-to-middle incomes given student loans issued since September 2012 are written off by the government 30 years after repayments start.

If you have graduated, your first repayments will come out of your paypacket from the following April. So if you finished your course at the age of 21, you’ll be paying off your student debt until you turn 51 or 52.

Graduates on higher salaries are more likely to finish paying off their student loans ahead of the cut off date. For students who took out loans before the 2006/07 academic year, your student loan will be written off once you turn 65.

For those who took them out between the 2006/07 and 2011/12 academic years, the cut off is 25 years after the April your repayments started. Under the rules coming in for those studying from September 2023 onwards, loans will be written off 40 years after repayments begin. It means they are likely to be paying back their loans into their early 60s.

As the government has announced a lower repayments threshold of £25,000 for these future graduates, low-to-middle income former students will pay back more towards their student loans for a longer period. Save the Student - a pressure group for current and recent students - told NationalWorld this additional decade of repayments was “scary”.