Lots of people are hoping to see a tax cut in their payslips after the British government announces its annual budget in March. The prime minister, Rishi Sunak, has said he wants to reduce the tax burden on workers, at a time when the country is paying more of the money it makes to the Treasury than at any time since the second world war.
But in all the discussion about tax cuts, what’s rarely talked about is the fact that last year the government made a change to student loan conditions that means millions of future graduates will get less money in their pay packets – and pay much more to the government over their lifetimes. What’s more, this will affect mostly low and middle earners, while some of the highest earners will actually pay less.
In 2023, the government introduced the biggest reforms to the student loans system in England in over a decade, in order to increase the proportion of student loan debt that is eventually repaid.
Students starting university from August 2023 will have to make loan repayments for longer – 40 rather than 30 years. And they will start repaying when their salary reaches £25,000, rather than nearly £30,000 under the previous system.
How interest is charged has also changed. Previously, higher earners paid more interest, but now new borrowers will pay the same rate, which is linked to a measure of inflation (the rate at which prices go up).
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