Guide discussion: Martin Lewis’ 6 need-to-knows about ‘Plan 5’ English student finance

MSE_Ben_S

This is the place to discuss Martin's new guide on 'Plan 5 English student finance'.

We'd love to hear your thoughts, personal experiences, and general feedback. 

If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.'

Ed-1

MSE_Ben_S said:

This is the place to discuss Martin's new guide on 'Plan 5 English student finance'.

We'd love to hear your thoughts, personal experiences, and general feedback. 

If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.'

The information in this table is wrong regarding Scotland and Northern Ireland postgraduate loans:

 https://www.moneysavingexpert.com/students/which-student-loan-plan-am-i-on-

Postgraduate loans in Scotland and Northern Ireland are on Plan 4 and Plan 1 respectively (rather than the separate Plan 3 like in England and Wales) and are added to undergraduate loans.

agingstudent

Is it possible to please provide some clarification regarding repayment of a Plan 5 student loan where the only income is pension income? 

Ed-1

agingstudent said:

Is it possible to please provide some clarification regarding repayment of a Plan 5 student loan where the only income is pension income? 

Generally pension income doesn't count as it's not subject to National Insurance deductions. Only NICable income counts unless you are required to submit a self-assessment when unearned income over £2k is counted.

silvercar

Ed-1 said:

agingstudent said:

Is it possible to please provide some clarification regarding repayment of a Plan 5 student loan where the only income is pension income? 

Generally pension income doesn't count as it's not subject to National Insurance deductions. Only NICable income counts unless you are required to submit a self-assessment when unearned income over £2k is counted.

Even PAYE income isn’t NICable after state pension age. If people have student loan repayments stretching beyond state retirement age, does that mean they won’t pay student loan repayments unless they have over 25k of unearned income?

Ed-1

silvercar said:

Ed-1 said:

agingstudent said:

Is it possible to please provide some clarification regarding repayment of a Plan 5 student loan where the only income is pension income? 

Generally pension income doesn't count as it's not subject to National Insurance deductions. Only NICable income counts unless you are required to submit a self-assessment when unearned income over £2k is counted.

Even PAYE income isn’t NICable after state pension age. If people have student loan repayments stretching beyond state retirement age, does that mean they won’t pay student loan repayments unless they have over 25k of unearned income?

Yes.

https://www.brightpay.co.uk/docs/23-24/student-loan-deductions/

The loan deductions all operate in the same manner, being calculated as a percentage of employee earnings that are subject to Class 1 National Insurance contributions above a specific threshold.

It's also worth noting that unearned income (if over £2,000) is only taken into account if you are required to submit a self-assessment. Having a student loan doesn't require you to submit a self-assessment.

All these rules were designed by Labour on the intent that loans would be repaid in full. Now that the system has effectively become a tax, the rules are rather inequitable in demanding more tax from people simply because they are required to submit a self-assessment.

as14452

I have an undergrad on plan 2 and am going back in 2023 to do a PGCE (1 year course,  fees of £9250) which will be on the new plan (classed as another undergrad loan). I receive a bursary of 27000 for the course - am I best to try to pay the course fees upfront from this or should I get a student loan?

silvercar

as14452 said:

I have an undergrad on plan 2 and am going back in 2023 to do a PGCE (1 year course,  fees of £9250) which will be on the new plan (classed as another undergrad loan). I receive a bursary of 27000 for the course - am I best to try to pay the course fees upfront from this or should I get a student loan?

Your existing plan 2 loan will mean that you will already be making payments once you earn more than the threshold, so effectively a 9% graduate tax until such a time as your existing loan is repaid in full with interest or written off. So you taking a new loan won't increase the payments you make until such a time as the plan 2 loan will be cleared. 

We don't know your future income levels, but assuming a pgce means you are likely to be in teaching, I would expect that your loan will continue for quite a while. The write off is at 30 years after repayment starts, so if you don't take the pgce loan, it will be 30 years before you see the benefit of not taking the loan now. For this reason I would be inclined to take the loan and any other maintenance loan you can get, as it won't effect repayments unless you have a consistently high earning career path over the next 30 years. But it is crystal ball territory.

Ed-1

silvercar said:

as14452 said:

I have an undergrad on plan 2 and am going back in 2023 to do a PGCE (1 year course,  fees of £9250) which will be on the new plan (classed as another undergrad loan). I receive a bursary of 27000 for the course - am I best to try to pay the course fees upfront from this or should I get a student loan?

Your existing plan 2 loan will mean that you will already be making payments once you earn more than the threshold, so effectively a 9% graduate tax until such a time as your existing loan is repaid in full with interest or written off. So you taking a new loan won't increase the payments you make until such a time as the plan 2 loan will be cleared. 

We don't know your future income levels, but assuming a pgce means you are likely to be in teaching, I would expect that your loan will continue for quite a while. The write off is at 30 years after repayment starts, so if you don't take the pgce loan, it will be 30 years before you see the benefit of not taking the loan now. For this reason I would be inclined to take the loan and any other maintenance loan you can get, as it won't effect repayments unless you have a consistently high earning career path over the next 30 years. But it is crystal ball territory.

Because the Plan 5 threshold is lower than the Plan 2 threshold, from April 2026 (the earliest date Plan 5 loans enter repayment), the Plan 5 threshold will override the Plan 2 threshold for @as14452, increasing repayments.

Of course, if Labour win the election, this could change as they have plans to reduce monthly repayments "for every single new graduate". I take that to mean they'd be looking to raise the Plan 5 threshold, although unlikely above the Plan 2 threshold.

silvercar

Ed-1 said:

silvercar said:

as14452 said:

I have an undergrad on plan 2 and am going back in 2023 to do a PGCE (1 year course,  fees of £9250) which will be on the new plan (classed as another undergrad loan). I receive a bursary of 27000 for the course - am I best to try to pay the course fees upfront from this or should I get a student loan?

Your existing plan 2 loan will mean that you will already be making payments once you earn more than the threshold, so effectively a 9% graduate tax until such a time as your existing loan is repaid in full with interest or written off. So you taking a new loan won't increase the payments you make until such a time as the plan 2 loan will be cleared. 

We don't know your future income levels, but assuming a pgce means you are likely to be in teaching, I would expect that your loan will continue for quite a while. The write off is at 30 years after repayment starts, so if you don't take the pgce loan, it will be 30 years before you see the benefit of not taking the loan now. For this reason I would be inclined to take the loan and any other maintenance loan you can get, as it won't effect repayments unless you have a consistently high earning career path over the next 30 years. But it is crystal ball territory.

Because the Plan 5 threshold is lower than the Plan 2 threshold, from April 2016 (the earliest date Plan 5 loans enter repayment), the Plan 5 threshold will override the Plan 2 threshold for @as14452, increasing repayments.

Of course, if Labour win the election, this could change as they have plans to reduce monthly repayments "for every single new graduate". I take that to mean they'd be looking to raise the Plan 5 threshold, although unlikely above the Plan 2 threshold.

Assume you mean April 2026, not 2016. 

So from finishing the pgce and once starting work, OP will be making repayments to plan 2, then from April 2026 the repayments will increase by 9% of the difference between the thresholds, but the repayments over the plan 2 level will go to that loan, the repayments on the difference go to the plan 5 loan. 

Plan 2 threshold is 27,295. plan 5 threshold is 25k. So assuming earnings over 28k, 9% of  the difference is £206.55 that would go to the plan 5 loan, the remainder to plan 2. 

Maintenance loan will be near £10k (assuming max loan) and tuition fee is £9250,  so over £19k loan for the princely sum of £17 a month looks like a good deal to me. Taken in isolation of course.

Ed-1

silvercar said:

Ed-1 said:

silvercar said:

as14452 said:

I have an undergrad on plan 2 and am going back in 2023 to do a PGCE (1 year course,  fees of £9250) which will be on the new plan (classed as another undergrad loan). I receive a bursary of 27000 for the course - am I best to try to pay the course fees upfront from this or should I get a student loan?

Your existing plan 2 loan will mean that you will already be making payments once you earn more than the threshold, so effectively a 9% graduate tax until such a time as your existing loan is repaid in full with interest or written off. So you taking a new loan won't increase the payments you make until such a time as the plan 2 loan will be cleared. 

We don't know your future income levels, but assuming a pgce means you are likely to be in teaching, I would expect that your loan will continue for quite a while. The write off is at 30 years after repayment starts, so if you don't take the pgce loan, it will be 30 years before you see the benefit of not taking the loan now. For this reason I would be inclined to take the loan and any other maintenance loan you can get, as it won't effect repayments unless you have a consistently high earning career path over the next 30 years. But it is crystal ball territory.

Because the Plan 5 threshold is lower than the Plan 2 threshold, from April 2016 (the earliest date Plan 5 loans enter repayment), the Plan 5 threshold will override the Plan 2 threshold for @as14452, increasing repayments.

Of course, if Labour win the election, this could change as they have plans to reduce monthly repayments "for every single new graduate". I take that to mean they'd be looking to raise the Plan 5 threshold, although unlikely above the Plan 2 threshold.

Assume you mean April 2026, not 2016. 

So from finishing the pgce and once starting work, OP will be making repayments to plan 2, then from April 2026 the repayments will increase by 9% of the difference between the thresholds, but the repayments over the plan 2 level will go to that loan, the repayments on the difference go to the plan 5 loan. 

Plan 2 threshold is 27,295. plan 5 threshold is 25k. So assuming earnings over 28k, 9% of  the difference is £206.55 that would go to the plan 5 loan, the remainder to plan 2. 

Maintenance loan will be near £10k (assuming max loan) and tuition fee is £9250,  so over £19k loan for the princely sum of £17 a month looks like a good deal to me. Taken in isolation of course.

Yes, 2026. It seems only yesterday I was posting on these forums saying Plan 2 loans don't enter repayment until April 2016! Where does the time go?