Earnings Thresholds for Student Loan Repayment to be Slashed by the UK Government
Just after this week’s unveiling that ministers are intending to decrease the number of university graduates must earn before they can begin repaying student loans from £27,295 to £23,000,
James Andrews, the executive personal finance editor, provides some insight and assistance for recent graduates concerned that the proposed changes may have a financial impact.
The potential consequences of this planned system change appear to target those just starting in their careers, trying to find their footing in the post-COVID working climate, and already battling with low-paying graduate and entry-level positions.
If the threshold is reduced from £27,295 to £23,000, the graduates will find an additional £386.55 each year.
However, there are several measures and recommendations that graduates may consider and include in their finances before the future changes are implemented, some of which are mentioned below.
1. Utilise Graduate Discounts
You still have ways to take advantage of the discounts you were given while studying in the university if you just graduated.
Besides, if your student email account is still valid, you may still acquire a three-year NUS card, which will allow you to take care of student discounts until 2024. Those who have a card costing £24.99 for a three-year membership may take advantage of discounts at over 350 companies, saving money on dining out, clothes, health and fitness, and even travel.
Another sensible move graduates may make—especially those expected to travel frequently—is to acquire a 16-25 railcard, which will save them a third of the cost of numerous railway tickets. If you subscribe for a year, you will pay £30, while three-year will cost £70.
2. Shop Smartly
After your three years of university, your notion of cooking may consist of noodles, bread, and microwave-heating last night’s kebab for the morning. However, when you enter graduate school, there are several strategies to guarantee that you can supply yourself with a nutritious diet and enjoyable meals on your budget.
You should stock up on products you know you’ll frequently use, particularly if you notice a great deal that will allow you to save some cash when you purchase in bulk. For instance, acquiring an entire chicken and roasting it yourself at home—while using the leftovers over the week, may be less expensive than purchasing breasts for a single dish.
3. Know Your Daily Spending Habits
Although no one likes to delve into their finances, going over your online bank statements with a fine-tooth comb may be highly enlightening when reducing needless expenditure.
The daily coffees and pastries from the local café, weekly takeaway pizzas, and endless excursions to the pub with pals after work are all well and good. Still, it’s worth asking yourself if the money you’re spending is reasonable.
Make a note of how much you spend each month or quarter at some of your favourite regular hangouts, and if the total surprises you, it may be time to cut back and save some money.
4. Don’t Overpay Your Student Loans
The recent suggestion of reducing the student loan threshold repayments might result in early loan repayments or even overpayments to relieve the debts.
This is a blunder because student loans cannot make you run out of cash, do not affect your credit score, and are forgiven after 30 years. The amount you return isn’t determined by how much you owe; the exact amount is deducted from your paycheck, whether you owe £5 or £50,000.
Furthermore, as your income falls, make your payments—which becomes £0 if your wages fall below the threshold.
Spare cash, on the other hand, can be spent on whatever you choose.
Other obligations, loans, or payments continue to fall due regardless of your income, have an influence on your credit record, and might eventually lead to county court judgments against you or even bankruptcy.
If you are debt-free, consider saving or putting the money in a place where it can grow—allowing you the flexibility to meet unexpected expenditures or put it towards something you want to save up for.
Denzil is an experienced writer and a procurement graduate on a mission to eliminate poor regurgitated content while advocating for top-notch digital content. When he’s not writing, Denzil joins the rest of the world watching the English Premier League games.