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Martin Lewis has issued a warning to people earning £25,000 – because they will be forced to start repaying their student loan “even on minimum wage jobs” after a “killer stealth tax rise”.
The minimum wage increased to £12.21 per hour this month, meaning someone on that salary doing a full 40 hour week would now earn just over £25,000 per year. The issue with that, the Money Saving Expert founder says, is that the threshold for student loan repayment for those who recently left university – Plan 5 loans – is frozen at £25,000. It means even minimum wage workers are now going to be dragged into paying off their student loans, losing 9% of their earnings to the repayments and coupled with the repayment timeframe being increased to 40 years, means graduates will end up paying as much as 50% more.
Martin Lewis warned that the “killer changes” are a “huge stealth rise”.
He explained via X this week: “A full time worker doing 40hrs a week on the new increased £12.21/hr minimum wage would earn just over £25,000.
“The Plan 5 student loan repayment threshold (ie English students who started uni since 2023) is £25,000 and is frozen until 2027
“So when those graduates leave uni, even on min wage jobs, they’ll now often need to start repaying (a little) bit of their student loans.”
Martin warned that the “killer changes” mean many will pay back about 50% more than before and is a “huge stealth rise that many missed”.
He warned: “Many people saying ‘it’s the interest rates that are the killer’. Actually that’s not true.
“These new Plan 5 loans interest is set at the rate of inflation. That seems good but it distracted from the killer changes to this cohort of students… 1. The repayment threshold was lowered to £25,000 so people start repaying on lower incomes. 2. Repayments last 40 years not 30 years.
“For many this effectively increased what they’d likely repay by very roughly around 50% (barring very high earners who’d repay less due to lower interest and the fact they’d have cleared early anyway).
“It was a huge stealth rise that many missed, as it’s tough to explain and people focus on tuition fees (the recent rise in which had trivial impact compared to these changes).
“I’m saying the student loan repayment threshold was always meant to reflect graduate premium earnings. Now it’s set at minimum wage it clearly doesn’t anymore.”
