⚠️ Student Loan Changes Alert! 🚨
Heads up, graduates! Martin Lewis, the known Money-Saving Expert, has flagged some big changes for those with Plan 2 student loans. Brace yourselves as the Labour Government has announced plans to freeze repayment thresholds and interest rates over the next three years, starting in 2027-28. This means the interest rate will sit at a hefty 7.9%—a move said to rake in £400 million annually.
Lewis highlights that these changes, tied to the recent Autumn Budget by Chancellor Rachel Reeves, could squeeze your wallet. Why? Traditional Plan 2 loans were designed to charge interest beyond RPI inflation, and now many graduates find their boosted earnings pushing them into higher tax brackets due to inflation. But here’s the catch—those tax brackets are also frozen, a sneaky way for the government to collect more tax, known as ‘fiscal drag’.
With the cost of living spiralling higher, repaying student loans becomes tougher. Though a degree can increase lifetime earnings by 20% to 30%, not everyone reaps this benefit. Plus, the potential impact of AI on job markets casts doubts on future earnings for grads.
Mid-level earners, in particular, might feel the pinch—paying more each year without proportional gain. It’s crucial to stay informed and seek money-saving tips wherever possible. These changes could impact your finances significantly, so keep your eyes peeled and wallets ready! 💼💸