Student Loan - Plan 1

Money_Conscious_Mummy
Money_Conscious_Mummy Posts: 4
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edited 1 March 2023 at 2:37PM in Student MoneySaving
What is the reason for plan 1 to be spilt into two rules - one for those who went to uni before 2005 and one for those who went after?
Going through the details I can now see that my loan won't get cancelled until I am 65 - that is 44 years after I graduated (I don't earn enough to pay it off any sooner) but the threshold to start repaying is much lower at £20,195. 
Instead of my loan reducing, it is actually growing each year as my payments don't seem to cover the interest that is added to the loan.
If I had graduated 5 years later then the loan would be cleared 25 years after graduation under the rules of plan 1 (which would have been about 5 or 6 years from now for me).
I have still got another 25 years left of student loan repayments because I went to uni from 2001 - 2004.
Are those of us on a pre 2005 Plan 1 for student loan are getting a rough deal? 

Comments

  • DrEskimo
    DrEskimo Posts: 2,333
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    I believe 2006-2007 was when the tuition fee cap was raised from £1,000 to £3,000/year. So the overall amount of your loan would be considerably lower.
  • Ed-1
    Ed-1 Posts: 3,849
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    edited 1 March 2023 at 12:38PM
    What is the reason for plan 1 to be spilt into two rules - one for those who went to uni before 2005 and one for those who went after?
    Going through the details I can now see that my loan won't get cancelled until I am 65 - that is 44 years after I graduated (I don't earn enough to pay it off any sooner) but the threshold to start repaying is much lower at £20,195. 
    Instead of my loan reducing, it is actually growing each year as my payments don't seem to cover the interest that is added to the loan.
    If I had graduated 5 years later then the loan would be cleared 25 years after graduation under the rules of plan 1 (which would have been about 5 or 6 years from now for me).
    I have still got another 25 years left of student loan repayments because I went to uni from 2001 - 2004.
    Are those of us on a pre 2005 Plan 1 for student loan are getting a rough deal? 

    As above - that's how Labour implemented the 2006 reforms with the top-up fees of £3k. They also raised the repayment threshold of £10k which applied to your loans to £15k from 2005, not just for new students.

    https://www.telegraph.co.uk/news/uknews/1389769/Treasury-blocks-Blairs-student-loans-pledge.html

    The original proposals were significantly watered down to get them through Parliament. They originally planned to keep the write off at 65 but introduced the 25 year write off to win over enough Labour rebels. Even then the reforms only squeeked through by 5 votes (and even then on the back of the votes of Scottish MPs as back then it wasn't English votes for English laws).

    Pre-2006 plan 1 is very similar to the new post-2023 plan 5 which will last 40 years with a very similar repayment threshold.


  • silvercar
    silvercar Posts: 46,750
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    I’ve asked the forum team to move this to the student board. You will see many threads about the different loan plans over there.
    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 [email protected] (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
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