Student loan pre 2021 8 May 2022 at 8:19PM in Loans 5 replies 102 views

Laurawhitmore68

I have £3k left to pay on my student loan. Should i pay it off before the 12% increase in September 2022? I earn 40k a year and my interest on the loan atm is 1.5%
Thank you!!

DrEskimo

I take it the title is a typo and you have a pre 2012 student loan, i.e. a Plan 1? That would have to be true if your rate is currently 1.5%.

In which case, your rate won't increase to 12% in September. It will be the lower of either BoE + 1% or inflation.

Laurawhitmore68

Thanks @DrEskimo! yes typo   
How sure are you on this? is the 12% just on new loans?

DrEskimo

Laurawhitmore68 said:

Thanks @DrEskimo! yes typo   
How sure are you on this? is the 12% just on new loans?

I am indeed!

All details here, but it's only Plan 2 loans that will go to 12%, since they are only based on RPI (along with a constant % increase relative to your earnings).

Plan 1 are either RPI OR the BoE rate + 1%, whichever is lowest. BoE rate is now 1%, so will increase from 1.5% to 2%, but since it's the lowest of either RPI or interest rates, it means that the low BoE interest rate is ensuring that Plan 1 interest rates don't increase to 12%.
 

silvercar

Have a read of some of the threads on the Student board, for information on loan interest rates.

https://forums.moneysavingexpert.com/categories/student-money-saving

[Deleted User]

Even the 1.25% increase to 1.5% was a pain given it's meant to be done in September annually but they are allowed to bump it up if they like. If 2% hits in September, I suspect I might be breaking even on repayments, rather than loan going down, more's the pity!