Students gunning for high-paying jobs in law, medicine and finance could save £20k by taking a gap year, experts claim

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By Aishah Hussain on


Student loan reforms mean wannabe lawyers ‘could gain substantially’ by delaying uni studies until 2023

Students planning to enter high-paying professions such as law, medicine and finance are being advised to take a gap year to save £20,000 as a result of reforms to the student loan system coming into force next year.

The government announced in February that the student loan repayment threshold will be cut from £27,295 to £25,000 and the period over which graduates pay back their loans will increase from 30 to 40 years. The reforms will also see the rate of interest paid by students reduce from the RPI (Retail Price Index) inflation rate plus 3% to just RPI.

New research by the Institute for Fiscal Studies (IFS) shows that high-earners commencing their studies in 2023 will repay around £20,000 less than those starting this year, as a result of the lower interest rate.

High-earners are understood to be those with an annual income of £50,000 or more by the time they reach 30. Legal Cheek‘s Firms Most List shows fresh-faced trainees can start on salaries of £50,000 or more at some of the City’s elite law firms.

According to the analysis graduates with lower to middling earnings will be hit hardest by the changes, with a lifetime loss of around £30,000. These grads enjoyed large taxpayer subsidies before the reforms, according to the IFS, but will now have to pay back a much larger share of their loans under the new system.

These graduates are better off starting university this academic year to benefit from the shorter repayment period and higher earnings threshold for loan repayments, the data suggests.

“Overall, the highest-earning borrowers will be better off under the system from 2023 onwards, and low-earning borrowers will be better off under the 2022 system,” think-tank IFS said. “For 2022 school leavers, this means that incentives regarding whether to take a gap year will crucially depend on their expected future earnings.”

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The IFS also found the new student loans system will be “substantially less generous” for middle-earning graduates from the 2012–22 starting cohorts. They are affected by changes in repayment thresholds but do not benefit from lower interest rates and stand to lose around £20,000 compared to the old system.

Elsehwhere, research by recently found the average law student will accumulate £96,444 of debt upon graduation. Law ranked 20th in the table of 34 subjects which shows little difference in the amount of debt accrued at the top-end.

Psychology grads take out the most in loans (£99,505), according to the research, whilst economics grads take out the least (£56,127).

The data was collated prior to the government reforms and so students could face even higher levels of debt. The IFS this week estimated the student loan interest rate could rise to as much as 12%. It will be capped for 2023 starters, however, and there won’t be a huge impact on loan repayments in the long run.

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