Martin Lewis issues warning to anyone making student loan repayments

Martin Lewis has warned UK households over a "50 per cent" rise in a key bill. The BBC Sounds podcast host has been discussing student loans and finance on Twitter, now X, this week, after the Labour Party government opted to hike tuition fees.

In an update, Money Saving Expert founder Mr Lewis wrote: "People focus on the interest, but the interest for current loans is set at the rate of inflation (so no real cost). That was the fig-leaf of the 2023 changes. People saw lower interest and thought great.

"They just didn't realised that when combined with the other changes - lowering the repayment threshold and extending repayments to 40yrs from 30, it'd still see an increase in the amount a typical uni leaver pays by an order of about 50%."

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A Twitter user replied: "All interest rates are calculated from the UK 10 year Gilt which is rising as a result of the budget borrowing. Same thing happened with Liz Truss mini budget." A second said: "Sorry but that's not true. Plan 5 rate is 4.3% because they set it in September for a full year based on the March figure, even though that's when it was tumbling.

"However, they whack it up outside of September when inflation is high. On average it's higher than inflation.." Another replied: "The 2023 loan changes may look appealing with inflation-based interest rates, but the real cost is hidden in the extended repayment terms and lower income threshold.

"While interest might seem manageable, paying over 40 years instead of 30 and starting repayments at a lower income level means graduates will actually pay significantly more—often around 50% more over a lifetime. This setup risks making loans more financially burdensome despite appearing cheaper on the surface."

Mr Lewis was replying to a fan who had tweeted: "What would be the impact if Govt removed the interest charged on loans and tuition fees? Would it enable growth as students were not carrying significantly greater debt?"