Students in England irate over reports of early loans repayment

Students in England have reacted with anger to reports that the government is planning to make them start paying back their loans earlier in their careers when salaries are lower, as part of an overhaul of student financing designed to save the Treasury money.

© Provided by The Guardian Photograph: Imagedoc/Alamy

According to a report in the Financial Times, ministers are considering cutting the threshold at which graduates begin to repay their tuition and maintenance loans from £27,295 – the current point at which repayments begin – to as low as £23,000.

The controversial move would ensure that more students start paying back their loans earlier in their careers, with lower earners hit hardest, and could save the Treasury as much as £2bn a year.

After 18 months of Covid disruption during which university courses have moved online and students were often confined to their bedrooms, the National Union of Students said the injustice of such a move was astounding.

Hillary Gyebi-Ababio, the NUS vice-president for higher education, commented: “We would be totally opposed to any plans on reducing the salary repayment threshold for student loans. Like the government’s decision to increase national insurance contributions, this burden targets people earning lower incomes – 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.”

© Photograph: Imagedoc/Alamy Students on campus at the University of East Anglia in Norwich.

Martin Lewis, the consumer finance champion, also raised concerns about the proposal, warning it would “hugely” increase what graduates – especially lower earners – pay. In addition, the founder of Moneysavingexpert.com warned the government against any attempt to retrospectively impose changes on those with existing loan contracts.

Writing on Twitter, Lewis described the FT report as “disturbing” and added: “The key is if it hits those who already have loan contracts, we fought off retrospective change before (I even hired lawyers).”

He previously tackled the government over its decision to freeze the repayment threshold, arguing that minsters had said it would rise with inflation, complaining that a failure to raise it represented a broken promise.

Other measures the government has been considering following the Augar review of tertiary funding commissioned in 2018 include a cut in tuition fees from £9,250 to £7,500, a cap on student numbers for certain courses and minimum qualifications. The chancellor, Rishi Sunak, is keen to overhaul student financing in his spending review ahead of next month’s budget.

Commenting on tuition fee cuts, Lewis added: “Cutting tuition fees to £7,500 only benefits the highest earning graduates, the rest still repay the same 9% of earning above the threshold for 30 years. While lowering the threshold to £23,000 means most earning above that would pay £400 a year more for 30 years.”

Jo Grady, the general secretary of the University and College Union, also opposed the move. “Loading more debt on to students is not the way to deal with the failed marketisation of higher education. It is a regressive move that will hit lower earners hardest, as they will see the largest relative increases to their payments.”

A Department for Education spokesperson said the student loan system was designed to ensure all those with the talent and desire to attend higher education were able to do so, while ensuring the cost was 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.”

The policies under consideration are aimed at reducing the rate of unpaid student loans. Average graduate debt is expected to reach £47,000 this year, with 54% of loans written off as the Treasury’s resource accounting and budgeting (Rab) charge. Only 12% of graduates are expected to repay their loans in full, while 33% are expected to not repay anything after 30 years.

University vice-chancellors are watching closely in the run-up to the spending review. Sir David Bell, the vice-chancellor of Sunderland University, said he suspected there would be a “mixed package”, with consequences for both students with changes to loan repayments and institutions with possible minimum entry requirements.

“Add to that the likely continuing freeze of the £9,250 undergraduate tuition fee, with the Office for Students – in parallel – ramping up pressure on ‘quality and standards’, the government may feel that it can make both funding and policy changes without a big fight around cutting fees.”

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