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Plan 3 student loans?

“Plan 3” loans, aka “master’s loans” are postgraduate loans. They were announced at Autumn Statement 2014 and have been subject to consultation since

Ian     Holloway
Ian     Holloway

We have just gotten used to operating Plan 2 loans. These apply where the ex-student was resident in England or Wales at the time that they took out the loan and have a higher threshold. 1 August 2016 saw a new plan type – possibly to be called Plan 3. This is very different from Plan 1 or 2.


Dealing with Plan 1 and 2 first, these should now be thought of and referred to as undergraduate Loans. There are two types:


1. Plan 1 – UK-wide with a threshold of £17,495 in 2016-17.
2. Plan 2 – in England and Wales with an annual threshold of £21,000 in 2016-17. This threshold is frozen in England until 2021.


These are pretty much bedded in, with only a couple of things that I am aware of to look for. One is the fact the Plan 2 threshold has only been frozen in England so could, possibly, vary in Wales, where this is a devolved responsibility. The other potential issue is whether the Scottish government will make any changes to the Plan 1 threshold. The Scottish National Party’s 2016 manifesto stated that this would increase in to £22,000. Will that be 2018-19? Look out for anything that Mr John Swinney, deputy first minister and cabinet secretary for education and skills, might say on this.


“Plan 3” loans, aka “master’s loans” are postgraduate loans. They were announced at Autumn Statement 2014 and have been subject to consultation since. These are designed to support people who want to study further and do not already have a postgraduate degree. The Education (Postgraduate Master’s Degree Loans) Regulations 2016 provide the legislative backing for these and apply to loans issued for courses commencing on or after 1 August 2016. Eligibility for master’s loans is restricted to people who are normally in England, though the criteria does extend outside of the UK but not to residence in the other countries of the UK. They can be paid up to £10,000 per academic year and the applicant must be under the age of 60.


The repayment of these loans will mean a change to practices and procedures (and software). They will start to become repayable from April 2019 and, like Plan 1 and Plan 2, postgraduate Plan 3 loans will be income-contingent. The main points are:


• The threshold will be set as £21,000, frozen until 2021.
• The repayment percentage will be 6% plus.
• Any repayment for this loan runs concurrently with any repayment for a Plan 1 or 2. So, as well as repaying an undergraduate Loan, the ex-student turned employee may also be repaying a postgraduate loan.


In payroll terms, April 2019 is only just around the corner and guidance on these “Plan 3” Loans will, undoubtedly, trickle out over the next couple of years. This should give plenty of time for joined-up thinking, as there will be a need for everyone affected to be involved – HMRC, employers, UK payroll professionals and, importantly, the software developers that make it work in reality.


Please don’t say that I didn’t give everyone enough warning!

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Plan 3 student loans? Plan 3 student loans?
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