Cancelling your gap year could save students £40k, says Money Saving Expert

Students who are planning on taking a gap year could be £40,000 worse off than those who go straight to university, due to new changes to the student loan system.

Previously, graduates had to earn £27,295 a year before they started repaying their student loan, with all debts wiped out after 30 years.

However, from 2023, graduates will have to start paying back their loan when their yearly salary hits £25,000, with the maximum term for making repayments extended to 40 years.

Long story short, those who go straight to uni this September will be subject to the old rules while those who go a year later will face the new ones.

While higher earners will be better off in the new system and lower earners won’t see much difference, those in the middle ground (the majority) could be up to £40k worse off than their peers.

According to Money Saving Expert Martin Lewis, students should consider the finances before deciding whether to take a year out this year, as doing so could be very costly.

“If everything else is equal, then taking a year out could be a very, very expensive deal,” Lewis told Times Higher Education. “There are clearly people out there who by taking a year out, rather than going to university when they can now [in September 2022], will be paying over their lifetime £30,000 to £40,000 more.”

Before tuition fees were raised from £3,000 a year to as much as £9,000 back in 2012, there was a mass-cancellation of gap years to avoid the extra financial cost. It’s thought a similar phenomenon could take place in ahead of the upcoming academic year.

This comes as Chancellor Rishi Sunak unveiled his Spring Statement, branded “a disgrace for students, young people and graduates” by the National Union of Students.

Related articles recommended by this writer:

• The government isn’t just ignoring students – it’s actively making life harder for them