New interest thresholds and plan 5 interest rules come into force

The instrument creates a new category, the plan 5 loan, defined as a loan taken out by a person in respect of a course the person begins on or after 1 August 2023¹. Borrowers are not required to repay any part of a plan 5 loan on or before 5 April 2026, and unless another provision applies, the loan is cancelled on the 40th anniversary of the date on which the borrower became liable to repay it¹. The regulations also rename existing categories, substituting "plan 2 loans" for "post-2012 student loans"¹.

The regulations set out definitions for each plan.

On interest, the regulations provide that "The Authority must substitute the prevailing market rate for the interest rate"¹. A "standard interest rate" is defined as the greater of zero or the percentage increase in the retail price index between the two Marches immediately before the commencement of the academic year in which the loan bears interest¹. The regulations also set a repayment threshold figure for plan 1 loans of £246¹. The instrument extends to England and Wales, subject to provisions extending certain regulations to Northern Ireland and Scotland¹.

"The remainder of these Regulations come into force on 6th April 2023."

The Education (Student Loans) (Repayment) (Amendment) (No. 4) Regulations 2022¹

Why it matters for households

The changes affect student loan borrowers whose courses fall into different plan categories, with the plan 5 category applying to courses beginning on or after 1 August 2023¹. For those borrowers, no repayment of any part of the loan is required on or before 5 April 2026, and the loan is written off on the 40th anniversary of the date the borrower became liable to repay, unless another provision applies¹. The regulations also change how interest is set, with the Authority required to substitute the prevailing market rate for the interest rate, and a standard interest rate defined by reference to the retail price index¹. The repayment threshold for plan 1 loans is stated as £246¹. The regulations extend to England and Wales, with certain provisions also extending to Northern Ireland and Scotland¹.