Under this move, more graduates would pay this back monthly as those on lower salaries would also meet the requirements. This change would have a “huge impact” on students as it will increase the overall cost of going to university. Mr Sunak is reportedly looking to make drastic changes to student financing as part of his Spending Review before the October budget, and Martin Lewis has explained why this could have such a huge impact for students on lower incomes.
Speaking on a video on YouTube, the Money Saving Expert founder said: “If we drop the threshold from £27,000 to £23,000, all those who earn above £23,000 will repay nine percent of the difference.
“This is about £400 a year more, and the vast majority would repay that for 30 years.
“That’s £12,000 right there, a big hit on the cost of education.
“The only people who will gain from this would be those who will clear the loan in full within 30 years which tends to be the highest earning university leavers and graduates.
“The fact they are repaying more quickly means they will repay less interest in total.
“What this change does is it benefits the highest earners because they repay less in total.
“But it disbenefits all those earning above the threshold – which is the average graduate £23,000 and above – because they will repay a lot more, and they will repay a lot more during the entirety of the thirty years.”
Currently, graduates in England on plan two loans repay nine percent of everything they earn above £27,295 once they leave university.
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They repay this either this until the clear the borrowing plus interest, or it hits thirty years.
83 percent of those leaving university are unlikely to pay the loan back within the thirty years which means the repayments are more like a nine percent additional tax for thirty years.
This means by lowering the threshold, a lot of people will have to pay a lot more.
It has been suggested by unnamed Government ministers that this reduction may be to £25,000, but nothing has been confirmed.
Throughout the pandemic, remote learning and limited access to resources was the reality for many students.
With restrictions placed on the contact each person could have, university students did not get the full social experience whilst studying, but also they missed out on face to face teaching which is preferred.
On top of this lowering of the loan repayment threshold, younger workers are also set to face the Government’s 1.25 percent National Insurance hike.
Mr Sunak is now facing accusations of starting generational tax warfare with younger Britons footing the bill for the Government’s social care and austerity plans.
On Twitter, many politicians and social mobility experts voiced their opposition to the loan repayment hike on graduates.
Matt Western, Labour’s MP Warwick and Leamington, criticised the Tories for “widening the gap” between young people of different classes.
Mr Western said: “The Government plans to drop the student loan repayment threshold to £20k which will impact hardest on women graduates, those on lowest and middle incomes ultimately paying around £10,000 more.
“But wealthy students would be virtually unaffected.”
The full video of Martin Lewis can be watched on his youtube channel.Internet Explorer Channel Network