Government plans to lower salary level at which graduates start repaying loans branded ‘regressive’

Graduates may face having to repay their tuition fees sooner under the Government’s new plans to reform the student finance system.

Current graduates start to pay their loans back when they are earning £27,295 a year - and ministers are looking to reduce that figure.

In 2019, the repayment threshold was recommended to be lowered to £23,000 with graduates repaying their student loans over 40 years rather than 30.

But cutting the threshold would be “regressive” and a “substantial burden”, education unionists and economists warned.

What has been said?

Many warn that the lowering of the threshold will have a hugely negative impact on younger people.

Ben Waltmann, senior research economist at the Institute for Fiscal Studies (IFS), said: “As a large majority of graduates will never pay off their student loans, lowering the repayment threshold to £23,000 is effectively a tax rise on graduates with middling earnings worth nearly £2 billion a year.

“Under this policy, a graduate earning £30,000 a year would have to pay around £400 more per year – on top of more than £500 more in National Insurance contributions under the plans for health and social care announced earlier this month.”

Hillary Gyebi-Ababio, vice president for higher education at the National Union Of Students (NUS), likens the decision to the Government’s plans to increase National Insurance.

Ms Gyebi-Ababio states both “burden targets people earning lower incomes” and “after 18 months of such hardship, and with the looming hike in energy prices set to hit millions of the most vulnerable this winter, the injustice is simply astounding”.

Alternative proposals

Mr Waltmann has called on ministers to raise revenue through an extension of the student loan repayment period or through the tax system.

Jo Grady, general secretary of the UCU also told PA: “The Government should be looking at progressive taxes to publicly fund higher education.”

Alternatively, Ms Gyebi-Ababio calls on the government to “get their priorities right” and “scrap tuition fees”.

Why are there plans to lower the repayment threshold?

In order to save money, asking graduates to repay their student loans earlier is more “manageable” than other options, Nick Hillman, director of the Higher Education Policy Institute (Hepi) reported.

Mr Hillman stated “it is only responsible to consider which cuts could be catastrophic and which might be manageable.

Hepi’s research shows cutting the number of places just as the number of school leavers is growing so fast would be catastrophic, whereas asking graduates to repay more of the costs would be manageable. Unpalatable perhaps, but manageable.”

The Department of Education spokesman has insisted they will ensure the cost of higher education is “fairly distributed between graduates and the taxpayer.”

“We continue to consider the recommendations made by the Augar panel carefully alongside driving up quality of standards and educational excellence and ensuring a sustainable and flexible student finance system.”

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