Earnings contingent scholar mortgage reimbursement plans
Reimbursement Plan 1 (previous to 1 September 2012)
Repayments for Reimbursement Plan 1 loans are on the price of 9% of revenue above the revenue threshold. The desk beneath exhibits the change in revenue threshold for Plan 1 by monetary 12 months:
Interval relevant Annual revenue threshold 6 Apr 2000 to five Apr 2005 £10,000 6 Apr 2005 to five Apr 2012 £15,000 6 Apr 2012 to five Apr 2013 £15,795 6 Apr 2013 to five Apr 2014 £16,365 6 Apr 2014 to five Apr 2015 £16,910 6 Apr 2015 to five Apr 2016 £17,335 6 Apr 2016 to five Apr 2017 £17,495 6 Apr 2017 to five Apr 2018 £17,775 6 Apr 2018 to five Apr 2019 £18,330 6 Apr 2019 to five Apr 2020 £18,935 6 Apr 2020 to five Apr 2021 £19,390 6 Apr 2021 to five Apr 2022 £19,895 6 Apr 2022 to five Apr 2023 £20,195
Additional particulars on the calculation of Plan 1 curiosity will be present in part 2.1.
Reimbursement Plan 2 (submit 1 September 2012)
Repayments for Reimbursement Plan 2 loans are on the price of 9% of revenue above the revenue threshold. The desk beneath exhibits the change in revenue threshold for Plan 2 by monetary 12 months:
Interval relevant Annual revenue threshold 6 Apr 2016 to five Apr 2017 £21,000 6 Apr 2017 to five Apr 2018 £21,000 6 Apr 2018 to five Apr 2019 £25,000 6 Apr 2019 to five Apr 2020 £25,725 6 Apr 2020 to five Apr 2021 £26,575 6 Apr 2021 to five Apr 2022 £27,295 6 Apr 2022 to five Apr 2023 £27,295
Debtors usually turn into liable to make repayments from the April following the completion, or withdrawal from their course (their Statutory Reimbursement Due Date (SRDD)), nevertheless debtors with Reimbursement Plan 2 loans didn’t first turn into liable to repay till April 2016 as repayments couldn’t be taken by the tax system.
The place debtors even have an impressive Plan 1 mortgage, repayments are allotted based mostly on 9% of the distinction between the Plan 1 and Plan 2 thresholds; that is regardless of a borrower’s precise revenue. Any repayments made previous to a borrower ‘s Plan 2 Statutory Reimbursement Due Date (SRDD) will probably be allotted in entire to a borrower’s Plan 1 mortgage. Additional particulars on the calculation of Plan 2 curiosity will be present in part 2.2.
Reimbursement Plan 3 (Postgraduate loans)
Repayments for Reimbursement Plan 3 loans are on the price of 6% of revenue above the revenue threshold. The primary debtors with Reimbursement Plan 3 loans turned liable to repay from April 2019. The desk beneath exhibits the change in revenue threshold for Plan 3 by monetary 12 months:
Interval relevant Annual revenue threshold 6 Apr 2019 to five Apr 2020 £21,000 6 Apr 2020 to five Apr 2021 £21,000 6 Apr 2021 to five Apr 2022 £21,000 6 Apr 2022 to five Apr 2023 £21,000
The place debtors even have an impressive Plan 1 or Plan 2 mortgage, reimbursement of the 2 loans will probably be made concurrently, totalling 15% of earnings above the brink (9% for the Plan 1 or Plan 2 mortgage, plus 6% for the Plan 3 mortgage). Additional particulars on the calculation of Plan 3 curiosity will be present in part 2.3.
Rates of interest and calculations
While in reimbursement the annual Retail Worth Index (RPI) from March to March is all the time used as the premise for the rate of interest for all sorts of scholar mortgage from the next September to August.
Reimbursement Plan 1 loans
For Plan 1 ICR loans, the curiosity cost is affected by a cap on the financial institution base price of +1%. The rate of interest is the decrease of the RPI on the previous March, or 1% above the best base price of a nominated group of banks calculated frequently through the 12 months. The rate of interest doesn’t have an effect on the month-to-month reimbursement quantity of Earnings Contingent Loans; it should have an effect on the time taken to repay.
The RPI in March 2014 was 2.5% so the cap was utilized from 1 September 2014 and 31 August 2015 the place the rate of interest was 1.5%. The RPI in March 2015 was 0.9% so the cap didn’t apply between 1 September 2015 and 31 August 2016 the place the rate of interest was 0.9%. The desk beneath exhibits rate of interest by 12 months:
Interval relevant RPI @March Plan 1 rate of interest 1 Sep 2012 to 31 Aug 2013 3.6% 1.5% 1 Sep 2013 to 31 Aug 2014 3.3% 1.5% 1 Sep 2014 to 31 Aug 2015 2.5% 1.5% 1 Sep 2015 to 31 Aug 2016 0.9% 0.9% 1 Sep 2016 to 31 Aug 2017 1.6% 1.25% 1 Sep 2017 to 31 Aug 2018 3.1% 1.5% 1 Sep 2018 to 31 Aug 2019 3.3% 1.75% 1 Sep 2019 to 31 Aug 2020 2.4% 1.75% 1 Sep 2020 to 31 Aug 2021 2.6% 1.1% 1 Sep 2021 to 31 Aug 2022 1.5% 1.5% 1 Sep 2022 to 31 Aug 2023 3.9% 5.0%
Reimbursement Plan 2 loans
The Plan 2 curiosity cost is ready annually from 30 September to 31 August. The rate of interest while finding out is RPI +3% and stays so up till the borrower’s Statutory Reimbursement Due Date (SRDD) – normally the April following the completion, or withdrawal from their course. As soon as debtors are attributable to repay, curiosity will probably be variable and revenue contingent.
A Variable Curiosity Fee (VIR) is an rate of interest dependent upon the borrower’s earnings as soon as they turn into liable to repay. It was a system launched for loans taken out by England and Wales-funded entrants from AY 2012/13 onwards. The rates of interest are based mostly on the UK Retail Worth Index (RPI) plus the VIR and are added tothe quantity owed from the day of first cost till the mortgage is repaid in full.
The RPI a part of the rate of interest is up to date every year in September, utilizing the RPI from March of that 12 months. Till the SRDD is reached the VIR a part of the curiosity is 3%. The earliest SRDD for Plan 2 loans was April 2016 so the primary monetary 12 months the place the curiosity truly began various was 2016-17. The desk beneath exhibits the utmost rates of interest for this Plan by 12 months:
Interval relevant RPI @March Plan 2 – Max rate of interest 1 Sep 2012 to 31 Aug 2013 3.6% 6.6% 1 Sep 2013 to 31 Aug 2014 3.3% 6.3% 1 Sep 2014 to 31 Aug 2015 2.5% 5.5% 1 Sep 2015 to 31 Aug 2016 0.9% 3.9% 1 Sep 2016 to 31 Aug 2017 1.6% 4.6% 1 Sep 2017 to 31 Aug 2018 3.1% 6.1% 1 Sep 2018 to 31 Aug 2019 3.3% 6.3% 1 Sep 2019 to 31 Aug 2020 2.4% 5.4% 1 Sep 2020 to 31 Aug 2021 2.6% 5.6% 1 Sep 2021 to 31 Aug 2022 1.5% 4.5% 1 Sep 2022 to 31 Aug 2023 3.9% 6.9%
These incomes £25,000 or much less have been charged on the price of inflation (RPI), rates of interest for these incomes between £25,000 and £41,000 will probably be on a sliding scale from RPI to RPI +3%; and people incomes £41,000 or extra will accrue curiosity at RPI +3%.
Debtors who don’t reply to requests for info or proof turn into ‘Non-Compliant’ and incur the best rates of interest of RPI +3% regardless of revenue, till all required info is acquired. The desk beneath signifies the % of Plan 2 debtors incurring the variable a part of the curiosity in drive on the finish of financial-year 2022-23:
Tax 12 months ending 2022-23 – variable a part of rate of interest incurred (Plan 2 solely)
0% 0.01-0.99% 1.00-1.99% 2.00-2.99% 3% 98.2% 0.3% 0.2% 0.2% 1.1%
Those that are accruing RPI +3% are equal to circa. 36,200 out of three.2 million Plan 2 debtors.
Of the 1.1% who’re accruing RPI +3%, 78.3% are non-compliant.
Non-compliant makes up circa. 28,400 Plan 2 debtors.
Reimbursement Plan 3 loans (England & Wales solely)
The Plan 3 curiosity cost can also be set annually from 30 September to 31 August. The rate of interest while finding out is RPI +3% and stays so all through reimbursement.
The desk beneath exhibits the rates of interest for this plan by 12 months:
Interval relevant RPI @March Plan 3 – rate of interest 1 Sep 2016 to 31 Aug 2017 1.6% 4.6% 1 Sep 2017 to 31 Aug 2018 3.1% 6.1% 1 Sep 2018 to 31 Aug 2019 3.3% 6.3% 1 Sep 2019 to 31 Aug 2020 2.4% 5.4% 1 Sep 2020 to 31 Aug 2021 2.6% 5.6% 1 Sep 2021 to 31 Aug 2022 1.5% 4.5% 1 Sep 2022 to 31 Aug 2023 3.9% 6.9%
Prevailing Market Fee (PMR) cap by month
The Division for Training (DfE) screens rates of interest set by industrial banks utilizing month-to-month knowledge offered by the Financial institution of England. From July 2021, as the common industrial rate of interest (or Prevailing Market Fee (PMR)) fell beneath the conventional price charged on these loans (usually ‘RPI (Retail Worth Index) + 3% (depending on circumstance and revenue), so to not drawback debtors, a brief cap was put onto each Plan 2 and Plan 3 rates of interest.
The PMR price remained at beneath RPI + 3% (at various charges) from 1 July 2021 till 28 February 2023.