Student loan repayment plans based on income, interest rates and calculations (England)

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1. Income-Based Student Loan Repayment Plans

1.1 Repayment plan 1 (before September 1, 2012)

Repayments for Repayment Plan 1 loans are at the rate of 9% of income above the income threshold. The table below shows the evolution of the Plan 1 revenue threshold by fiscal year:

Applicable period Annual income threshold
April 6, 2000 to April 5, 2005 £10,000
April 6, 2005 to April 5, 2012 £15,000
April 6, 2012 to April 5, 2013 £15,795
April 6, 2013 to April 5, 2014 £16,365
April 6, 2014 to April 5, 2015 £16,910
April 6, 2015 to April 5, 2016 £17,335
April 6, 2016 to April 5, 2017 £17,495
April 6, 2017 to April 5, 2018 £17,775
April 6, 2018 to April 5, 2019 £18,330
April 6, 2019 to April 5, 2020 £18,935
April 6, 2020 to April 5, 2021 £19,390
April 6, 2021 to April 5, 2022 £19,895

Further details on the calculation of Plan 1 interest can be found in Section 2.1.

1.2 Repayment plan 2 (after September 1, 2012)

Repayments for Repayment Plan 2 loans are at the rate of 9% of income above the income threshold. The table below presents the evolution of the Plan 2 income threshold by fiscal year:

Applicable period Annual income threshold
April 6, 2016 to April 5, 2017 £21,000
April 6, 2017 to April 5, 2018 £21,000
April 6, 2018 to April 5, 2019 £25,000
April 6, 2019 to April 5, 2020 £25,725
April 6, 2020 to April 5, 2021 £26,575
April 6, 2021 to April 5, 2022 £27,295

Borrowers normally become required to make repayments from the April following the completion or withdrawal of their course (their statutory repayment due date (SRDD)), but borrowers with loans from the refund 2 only became liable for the first time in April 2016, as refunds could not pass through the tax system.

Where borrowers also have an outstanding Plan 1 loan, repayments are split based on 9% of the difference between the Plan 1 and Plan 2 thresholds; this regardless of the actual income of the borrower. Any repayments made before the statutory repayment due date (SRDD) of a borrower’s Plan 2 will be allocated in full to the borrower’s Plan 1 loan. Further details on the calculation of Plan 2 interest can be found in Section 2.2.

1.3 Repayment plan 3 (postdoctoral loans)

Repayments for Repayment Plan 3 loans are at the rate of 6% of income above the income threshold. The first borrowers with repayment plan 3 loans became indebted from April 2019. The table below presents the evolution of the plan 3 income threshold by fiscal year:

Applicable period Annual income threshold
April 6, 2019 to April 5, 2020 £21,000
April 6, 2020 to April 5, 2021 £21,000
April 6, 2021 to April 5, 2022 £21,000

Where borrowers also have a Plan 1 or Plan 2 loan outstanding, repayment of both loans will be made simultaneously, totaling 15% of earnings above the threshold (9% for the Plan 1 or Plan 2 loan, plus 6% for Plan 3 loan). Further details on the calculation of Plan 3 interest can be found in section 2.3.

2. Interest rates and calculations

During repayment, the annual Retail Price Index (RPI) from March to March is still used as the basis for the interest rate for all types of student loans from September to the following August.

2.1 Repayment plan 1 loans

For Plan 1 ICR loans, the interest charge is capped at the base bank rate of +1%. The interest rate is the lowest of the RPI in the previous March, or 1% above the highest base rate of a designated group of banks calculated regularly during the year. The interest rate does not affect the monthly repayment amount of income-based loans; this will affect the time it takes to refund.

The RPI in March 2014 was 2.5%, so the cap was applied from September 1, 2014 to August 31, 2015, where the interest rate was 1.5%. The RPI in March 2015 was 0.9%, so the cap did not apply between September 1, 2015 and August 31, 2016, when the interest rate was 0.9%. The table below shows the interest rates per year:

Applicable period RPI @mars Plan 1 interest rate
From September 1, 2012 to August 31, 2013 3.6% 1.5%
From September 1, 2013 to August 31, 2014 3.3% 1.5%
From September 1, 2014 to August 31, 2015 2.5% 1.5%
From September 1, 2015 to August 31, 2016 0.9% 0.9%
Sept. 1, 2016 to Aug. 31, 2017 1.6% 1.25%
Sept. 1, 2017 to Aug. 31, 2018 3.1% 1.5%
Sep 1, 2018 to Aug 31, 2019 3.3% 1.75%
Sep 1, 2019 to Aug 31, 2020 2.4% 1.75%
Sep 1, 2020 to Aug 31, 2021 2.6% 1.1%
Sep 1, 2021 to Aug 31, 2022 1.5% 1.5%

2.2 Repayment plan 2 loans

The interest charge for Plan 2 is fixed each year from September 30 to August 31. The interest rate during studies is RPI + 3% and the remainder until the borrower’s legal repayment due date (SRDD) – usually the month of April following the completion or abandonment of their course. Once borrowers are required to repay, interest will be variable and income dependent.

A variable interest rate (VIR) is an interest rate that depends on the borrower’s income once they become repayable. This was a system introduced for loans taken by entrants funded by England and Wales from AY 2012/13. Interest rates are based on the UK Retail Price Index (RPI) plus VIR and are added to the amount due from the day of the first payment until the loan is paid in full.

The RPI portion of the interest rate is updated once a year in September, using the RPI for March of that year. As long as the SRDD is not reached, the VIR part of the interest is 3%. The first SDRS for Plan 2 loans was in April 2016, so the first fiscal year where interest actually started to vary was 2016-17. The table below shows the maximum interest rates for this Plan per year:

Applicable period RPI @mars Plan 2 – Maximum interest rate
From September 1, 2012 to August 31, 2013 3.6% 6.6%
From September 1, 2013 to August 31, 2014 3.3% 6.3%
From September 1, 2014 to August 31, 2015 2.5% 5.5%
From September 1, 2015 to August 31, 2016 0.9% 3.9%
Sept. 1, 2016 to Aug. 31, 2017 1.6% 4.6%
Sept. 1, 2017 to Aug. 31, 2018 3.1% 6.1%
Sep 1, 2018 to Aug 31, 2019 3.3% 6.3%
Sep 1, 2019 to Aug 31, 2020 2.4% 5.4%
Sep 1, 2020 to Aug 31, 2021 2.6% 5.6%
Sep 1, 2021 to Aug 31, 2022 1.5% 4.5%

Those earning £25,000 or less were charged at the rate of inflation (RPI), interest rates for those earning between £25,000 and £41,000 will be on a sliding scale from RPI to RPI + 3%; and those who earn £41,000 or more will accrue interest at RPI + 3%.

Borrowers who do not respond to requests for information or evidence become “non-compliant” and incur the highest interest rates of RPI + 3%, regardless of income, until all required information is met. are received. The table below shows the % of Plan 2 borrowers bearing the variable part of the interest in force at the end of the 2018-19 financial year:

Tax year ending in 2020-21 – variable portion of interest rate incurred (Plan 2 only)

0% 0.01-0.99% 1.00-1.99% 2.00-2.99% 3% Of those who incur 3% – Compliant Among those who incur 3% – non-compliant
93.4% 2.7% 1.6% 0.7% 1.6% 52.5% 47.5%

2.3 Repayment Plan 3 loans (England and Wales only)

The Plan 3 interest charge is also fixed each year from September 30 to August 31. The interest rate during the studies is RPI + 3% and the rest throughout the repayment.

The table below shows the interest rates for this plan by year:

Applicable period RPI @mars Plan 3 – interest rate
From September 1, 2012 to August 31, 2013 3.6% 6.6%
From September 1, 2013 to August 31, 2014 3.3% 6.3%
From September 1, 2014 to August 31, 2015 2.5% 5.5%
From September 1, 2015 to August 31, 2016 0.9% 3.9%
Sept. 1, 2016 to Aug. 31, 2017 1.6% 4.6%
Sept. 1, 2017 to Aug. 31, 2018 3.1% 6.1%
Sep 1, 2018 to Aug 31, 2019 3.3% 6.3%
Sep 1, 2019 to Aug 31, 2020 2.4% 5.4%
Sep 1, 2020 to Aug 31, 2021 2.6% 5.6%
Sep 1, 2021 to Aug 31, 2022 1.5% 4.5%

2.4 Current market rate cap (PMR) per month

The Department for Education (DfE) monitors interest rates set by commercial banks using monthly data provided by the Bank of England. From July 2021, as the average commercial interest rate (or prevailing market rate (PMR)) fell below the normal rate applied to such loans (normally ‘RPI (retail price index) + 3 % (depending on circumstances and income), in order not to disadvantage borrowers, a temporary ceiling has been placed on the interest rates of plans 2 and 3.

The PMR rate remained below the RPI + 3% (at variable rates) from July 1, 2021 to February 28, 2022.

Month Disabled cap
Jul 2021 5.3%
August 2021 5.3%
Sep 2021 4.2%
October 2021 4.1%
November 2021 4.1%
Dec 2021 4.1%
Jan 2022 4.4%
February 2022 4.4%
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