Graduation: You may have to start repaying your student loan sooner than you think.

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In fiscal year 2020-21, the balance of outstanding student loans in the UK stood at £ 178 billion, and the average debt balance went to £ 28,000.

As you may already know, the payment of graduation loan from the salary of the graduates is taken by their employer when their income exceeds the payback threshold set by the government. If self-employed, debtors will have to pay their tax arrears at the end of the tax year.

But the issue of paying taxes in the 2022 tax year may be seen differently. As reported by the first The Financial Times, HM Treasury and the Department for Education are reportedly planning to drop the payback threshold of more than ,000 4,000. This does not mean that you can start repaying your loan sooner than you expect, but if you already earn above the threshold, you may have to pay more every year.

Here’s what you need to know about potential changes and how they could affect your finances in the coming tax year.

Payment plan threshold

There are currently 4 different types of student loan repayment plans in the UK, most of which fall into the Graduate Plan 2 (those who have started English or Welsh and undergraduate courses in the UK after 1 September 2012). Payback income threshold remains for this category 27,295 Every year before taxes and other deductions.

Once your income exceeds this threshold (i.e. you are earning £ 524 per week or more than £ 2,274 per month), 9% of the amount you earn above the threshold is deducted from your paycheck. However, with a proposal for a lower income threshold that is as low as £ 23,000, graduates whose current income falls between £ 23,000 and £ 27,295 will have their unexpected loan payments deducted from their paychecks in 2022.

The proposal is said to be consistent with the government’s efforts to save up to £ 2 billion annually. As every year, the debt repayment income threshold is supposed to change on April 6, although the changes have not been so drastic to date.

How much can you pay with the proposed change?

Today, a recent graduate from higher education earning £ 27,295 per year will have no deductions from their paychecks. So, let’s take a look at what the £ 23,000 payback threshold means for this person, as well as for loan holders earning more than £ 23,000 and £ 35,000 per year.

Annual income

Approximate annual payout with current £ 27,295 threshold

Approximate annual payout with proposed £ 23,000 threshold



£ 90



£ 477


690 lbs

£ 1170

The proposed changes could affect graduates’ annual net salaries by hundreds of pounds. Since more announcements are expected in the coming months, it may be a good idea to take a step forward and think about what these changes might mean for you in the new year.

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