Student loan pre 2021

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!!

Comments

  • DrEskimo
    DrEskimo Posts: 2,344 Forumite
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    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.
  • Thanks @DrEskimo! yes typo  :( 
    How sure are you on this? is the 12% just on new loans?

  • DrEskimo
    DrEskimo Posts: 2,344 Forumite
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    edited 9 May 2022 at 5:36PM
    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
    silvercar Posts: 46,945 Ambassador
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    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
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • 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!
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