Former students will be able to earn more before they have to start paying back their tuition fee loans.
English and Welsh students who took out loans from September 2012 onwards - when fees in England rose to up to £9,000 a year - will now start to pay back when they earn £25,000 a year instead of £21,000.
The government says the move could save graduates up to £360 a year. The National Union of Students said the change was "welcome relief" for many.
The Department for Education says some 600,000 graduates will benefit over the next financial year alone.
Previously, the repayment threshold for post-September 2012 loans had been frozen at £21,000 until 2020-21, but last autumn Prime Minister Theresa May announced a rise in the threshold from this new financial year.
The change will also lower the repayments of those earning over £25,000, as the percentage of salary paid back will be on a smaller amount.
Research carried out by the Institute for Fiscal Studies found raising the repayment threshold to £25,000 benefits middle-earning graduates the most, saving them up to £15,700 in repayments over their lifetimes.
Lower-earning graduates, who are likely to earn below the threshold for a significant part of their career, will see a smaller reduction in lifetime repayments, the IFS calculates.
While high-earning graduates - who would repay their loans in full - will see a reduction in yearly repayments, this will merely extend the period of time for which they have to repay and so will make little difference to their lifetime repayments.
IFS economist Laura van der Erve said: "Overall, repayments will fall by around £10,000 for the average graduate as a result of the threshold increase.
“This will significantly increase the long-run cost to the government of providing higher education. The long-run cost to the government will increase by more than £2bn a year, an increase of nearly 40%."
