Cost of going to university 'to double' under new loan rules, Martin Lewis warns

14 March 2022, 16:41

Martin Lewis has warned future students will pay double what current students do in order to go to university
Martin Lewis has warned future students will pay double what current students do in order to go to university. Picture: Alamy

By Daisy Stephens

Students going to university from September 2023 will pay double what those in the years before them paid because of changes to the repayment system, Martin Lewis has told LBC News.

Listen to this article

Loading audio...

The Money Saving Expert founder said because of "three major changes" - an extension to the loan repayment period, a lowering of the threshold, and a drop in interest rates - a typical student starting university next year will end up paying back double what students will currently repay.

"I think it's important for people to understand that the students from England from September 2023, a typical student will see the cost of going to university double," he told LBC News.

"And it is doubling because of three major changes."

Read more: Cost of living crisis: Energy bills set to soar at least 14 times faster than wages

Read more: Food prices rise at 'fastest rate in over a decade'

The first change is that the rate at which students start repaying loans is being cut from £27,295 a year to £25,000, the finance expert said.

He said that was combined with the fact the repayment period - the length of time you repay the loan for before it is wiped - is being extended from 30 years to 40.

"That's the biggest change here," he said.

"That has a phenomenal impact because currently only 17 per cent of people clear their debt within 30 years, which means 83 per cent of people will pay more because of the extension - and a lot more."

James O'Brien wonders where 'the threshold' is for govt to take action on cost of living

He said the third change - a cutting of the interest rate - was "positive" and "gives a little back" but in reality would only help higher earners who would have paid back the loan in full in 30 years.

"I think it's very important people understand that for new starters in September 2023 in England the cost of university, even though fees haven't gone up, the practical cost of university... is going to be very substantially higher for most low to middle earners," he said.

Read more: 'Give an opt-out or scrap it': MoneySavingExpert Martin Lewis blasts govt's energy loan

Read more: Cost of living crisis 'quickly becoming an emergency' in UK, warns SNP leader

"The lowest earners it won't change for because they don't repay anything.

"The highest earners will actually proportionately pay slightly less because they start repaying quicker and they pay less interest... for many it will double the cost of going to university."

Transport Sec warns over Russian impact on cost of living

As the changes only apply to students going to university from September 2023, Mr Lewis advised students currently in year 13 not to take a year off before going to university.

When asked if the cost of the degree was worth it for the potential impact on earnings, Mr Lewis said it depended on the course but said, for many people, university was still a good investment.

"I think it's important to say that university isn't just about what it can do for your future earnings, it's about your life, what opportunities it can give you," he said.

Read more: Putin's invasion of Ukraine will 'impact' cost of living, Grant Shapps warns

Read more: Martin Lewis' stark warning on 'outrageous' gas price rise

"I still think for many people going to university is a good idea if you're choosing the right course and you're making the right decision.

"What I think it will stop, and should shift, is those people who are going to university simply because 'I need to go to university, I don't know why, I don't know what I'm doing it for'.

"For them this increase in cost - look at the alternatives, look at apprenticeships, or degree apprenticeships, potentially."

'On what planet is the Govt living?': Tom Swarbrick takes aim at planned NI rise

He added: "I still think we have to be careful not to tell people university is unaffordable."

He also said the system was "closer to a graduate tax than it is a loan" and said prospective students should consider this when making their decision.

"The changes the Government has made for people repaying for 40 years, which means even most school leavers who go straight to university will still be repaying their debt into their 60s, means what we have in reality is something pretty close to a lifelong graduate tax," he said.

"So you have to say - am I willing to pay 9 per cent more tax above £25,000? Will my degree be worth it?

"And... for many, financially it will be, but for many financially it won't be.

"And the difficulty is deciding which of those categories you're in."