Income Contingent Student Loan repayment plans & interest rates and calculations (Wales)
Updated 22 July 2022
Applies to Wales
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1. Income contingent student loan repayment plans
1.1 Repayment Plan 1 (prior to 1 September 2012)
Repayments for Repayment Plan 1 loans are at the rate of 9% of income above the income threshold. The table below shows the change in income threshold for Plan 1 by financial year:
| Period applicable | Annual income threshold |
|---|---|
| 6 Apr 2000 to 5 Apr 2005 | £10,000 |
| 6 Apr 2005 to 5 Apr 2012 | £15,000 |
| 6 Apr 2012 to 5 Apr 2013 | £15,795 |
| 6 Apr 2013 to 5 Apr 2014 | £16,365 |
| 6 Apr 2014 to 5 Apr 2015 | £16,910 |
| 6 Apr 2015 to 5 Apr 2016 | £17,335 |
| 6 Apr 2016 to 5 Apr 2017 | £17,495 |
| 6 Apr 2017 to 5 Apr 2018 | £17,775 |
| 6 Apr 2018 to 5 Apr 2019 | £18,330 |
| 6 Apr 2019 to 5 Apr 2020 | £18,935 |
| 6 Apr 2020 to 5 Apr 2021 | £19,390 |
| 6 Apr 2021 to 5 Apr 2022 | £19,895 |
Further details on the calculation of Plan 1 interest can be found in section 2.1.
1.2 Repayment Plan 2 (post 1 September 2012)
Repayments for Repayment Plan 2 loans are at the rate of 9% of income above the income threshold. The table below shows the change in income threshold for Plan 2 by financial year:
| Period applicable | Annual income threshold |
|---|---|
| 6 Apr 2016 to 5 Apr 2017 | £21,000 |
| 6 Apr 2017 to 5 Apr 2018 | £21,000 |
| 6 Apr 2018 to 5 Apr 2019 | £25,000 |
| 6 Apr 2019 to 5 Apr 2020 | £25,725 |
| 6 Apr 2020 to 5 Apr 2021 | £26,575 |
| 6 Apr 2021 to 5 Apr 2022 | £27,295 |
Borrowers normally become liable to make repayments from the April following the completion, or withdrawal from their course (their Statutory Repayment Due Date (SRDD)), however borrowers with Repayment Plan 2 loans did not first become liable to repay until April 2016 as repayments could not be taken through the tax system.
Where borrowers also have an outstanding Plan 1 loan, repayments are allocated based on 9% of the difference between the Plan 1 and Plan 2 thresholds; this is irrespective of a borrower’s actual income. Any repayments made prior to a borrower ‘s Plan 2 Statutory Repayment Due Date (SRDD) will be allocated in whole to a borrower’s Plan 1 loan. Further details on the calculation of Plan 2 interest can be found in section 2.2.
1.3 Repayment Plan 3 (Postgraduate loans)
Repayments for Repayment Plan 3 loans are at the rate of 6% of income above the income threshold. The first borrowers with Repayment Plan 3 loans became liable to repay from April 2019. The table below shows the change in income threshold for Plan 3 by financial year:
| Period applicable | Annual income threshold |
|---|---|
| 6 Apr 2019 to 5 Apr 2020 | £21,000 |
| 6 Apr 2020 to 5 Apr 2021 | £21,000 |
| 6 Apr 2021 to 5 Apr 2022 | £21,000 |
Where borrowers also have an outstanding Plan 1 or Plan 2 loan, repayment of the two loans will be made concurrently, totalling 15% of earnings above the threshold (9% for the Plan 1 or Plan 2 loan, plus 6% for the Plan 3 loan). Further details on the calculation of Plan 3 interest can be found in section 2.3.
1.4 Welsh partial cancellation policy (PCP)
Students who took out a Maintenance Loan from Student Finance Wales from academic year 2010/11 (Repayment Plan 1 and 2) may receive a partial cancellation of up to £1,500 from the Welsh Government. The cancellation is applied on receipt of the first repayment against the loan. If a student has loans for more than one academic year the cancellation is only applied to the first year’s loan.
2. Interest rates and calculations
Whilst in repayment the annual Retail Price Index (RPI) from March to March is always used as the basis for the interest rate for all types of student loan from the following September to August.
2.1 Repayment Plan 1 loans
For Plan 1 ICR loans, the interest charge is affected by a cap at the bank base rate of +1%. The interest rate is the lower of the RPI at the preceding March, or 1% above the highest base rate of a nominated group of banks calculated regularly during the year. The interest rate does not affect the monthly repayment amount of Income Contingent Loans; it will affect the time taken to repay.
The RPI in March 2014 was 2.5% so the cap was applied from 1 September 2014 and 31 August 2015 where the interest rate was 1.5%. The RPI in March 2015 was 0.9% so the cap did not apply between 1 September 2015 and 31 August 2016 where the interest rate was 0.9%. The table below shows interest rate by year:
| Period applicable | RPI @March | Plan 1 interest rate |
|---|---|---|
| 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% |
2.2 Repayment Plan 2 loans
The Plan 2 interest charge is set each year from 30 September to 31 August. The interest rate whilst studying is RPI +3% and remains so up until the borrower’s Statutory Repayment Due Date (SRDD) – usually the April following the completion, or withdrawal from their course. Once borrowers are due to repay, interest will be variable and income contingent.
A Variable Interest Rate (VIR) is an interest rate dependent upon the borrower’s earnings once they become liable to repay. It was a system introduced for loans taken out by England and Wales-funded entrants from AY 2012/13 onwards. The interest rates are based on the UK Retail Price Index (RPI) plus the VIR and are added to the amount owed from the day of first payment until the loan is repaid in full.
The RPI part of the interest rate is updated once a year in September, using the RPI from March of that year. Until the SRDD is reached the VIR part of the interest is 3%. The earliest SRDD for Plan 2 loans was April 2016 so the first financial year where the interest actually started varying was 2016-17. The table below shows the maximum interest rates for this Plan by year:
| Period applicable | RPI @March | Plan 2 - Max interest rate |
|---|---|---|
| 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% |
Those earning £25,000 or less were charged at the rate of inflation (RPI), interest rates for those earning between £25,000 and £41,000 will be on a sliding scale from RPI to RPI +3%; and those earning £41,000 or more will accrue interest at RPI +3%.
Borrowers who do not respond to requests for information or evidence become ‘Non-Compliant’ and incur the highest interest rates of RPI +3% irrespective of income, until all required information is received. The table below indicates the % of Plan 2 borrowers incurring the variable part of the interest in force at the end of financial-year 2018-19:
Tax year ending 2020-21 - variable part of interest rate incurred (Plan 2 only)
| 0% | 0.01-0.99% | 1.00-1.99% | 2.00-2.99% | 3% | Of those incurring 3% - compliant | Of those incurring 3% - non-compliant |
|---|---|---|---|---|---|---|
| 95.5% | 1.8% | 1.0% | 0.5% | 1.1% | 46.9% | 53.1% |
2.3 Repayment Plan 3 loans (England & Wales only)
The Plan 3 interest charge is also set each year from 30 September to 31 August. The interest rate whilst studying is RPI +3% and remains so throughout repayment.
The table below shows the interest rates for this plan by year:
| Period applicable | RPI @March | Plan 3 - interest rate |
|---|---|---|
| 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% |
2.4 Prevailing Market Rate (PMR) cap by month
The Welsh Government monitors interest rates set by commercial banks using monthly data provided by the Bank of England. From July 2021, as the average commercial interest rate (or Prevailing Market Rate (PMR)) fell below the normal rate charged on these loans (normally ‘RPI (Retail Price Index) + 3% dependent on circumstance and income). So to not disadvantage borrowers, a temporary cap was put onto both Plan 2 and Plan 3 interest rates.
The PMR rate remained at below RPI + 3% (at varying rates) from 1 July 2021 until 28 February 2022.
| Month | PMR Cap |
|---|---|
| Jul 2021 | 5.3% |
| Aug 2021 | 5.3% |
| Sep 2021 | 4.2% |
| Oct 2021 | 4.1% |
| Nov 2021 | 4.1% |
| Dec 2021 | 4.1% |
| Jan 2022 | 4.4% |
| Feb 2022 | 4.4% |