Personal finance expert Martin Lewis has outlined the four ways that outstanding student loans can be wiped, as controversy grows over interest rates that leave many graduates owing more each year despite making repayments.
Speaking amid the ongoing debate, Mr Lewis said the first way is simply paying off the borrowed amount plus all interest. The second is death, meaning no one inherits the debt. The third applies if a person is deemed unlikely ever to work again due to physical or mental illness. The fourth is time-based, with the length depending on the UK nation and when the borrower started university.
Time limits vary by nation
Mr Lewis explained that for those from Scotland or Wales who started from 2012 onwards, loans are wiped 30 years after the April following graduation. In Northern Ireland, it is 25 years. In England, for courses started between 2012 and 2022, it is 30 years, but from 2023 onwards it rises to 40 years, meaning many could be repaying for nearly all their working lives.
Government review promised
Education Secretary Lucy Powell earlier said the “egregious” student loans system “needs looking at,” and reiterated that making repayment terms fair for students is “top of my in-tray.” She said the Government has committed to a review, but made no promises on changes.
Interest on Plan 2 loans, taken out between September 1 2012 and July 31 2023 in England, is charged at RPI inflation plus up to 3% extra depending on income. Repayments begin when graduates earn £29,385 or more, with 9% of income above that threshold paid back.
At the last budget, then-chancellor Rachel Reeves froze the repayment threshold at £29,385 for three years from 2027. Earlier this year, the Government capped the Plan 2 interest rate at 6% from September to protect graduates from rising inflation.
