Pe­nal loan rates for 50,000 grads

The Daily Telegraph - Your Money - - FRONT PAGE -

that the full-year fig­ures will eas­ily pass 2016’s to­tal.

An­gela Rayner, the shadow ed­u­ca­tion sec­re­tary, said the fig­ures showed “a deeply un­fair sys­tem” and re­it­er­ated the Labour Party’s calls to scrap tu­ition fees en­tirely.

Amatey Doku, of the Na­tional Union of Stu­dents, said: “Ab­surdly high in­ter­est rates are only a small part of the prob­lem but the Gov­ern­ment’s will­ing­ness to con­tin­u­ally add to the bur­den of student debt, and change the terms of re­pay­ment, is in­dica­tive of a com­plete dis­re­gard for the con­cerns of stu­dents, their fam­i­lies and the tax­payer, who will have to cover the cost of un­paid debt.

“It seems that the Gov­ern­ment is bent on cov­er­ing their ears and hum­ming loudly to block out the crit­ics as they make things worse and worse.”

As­sum­ing those 50,000 grad­u­ates have the av­er­age debt of £50,000, the ad­di­tional in­ter­est ac­crued could be as high as £75m a year. Of course, in re­al­ity some of those would be earn­ing more than £41,000, trig­ger­ing the high­est rate of in­ter­est in any case.

In Oc­to­ber the Gov­ern­ment an­nounced that new grad­u­ates would not have to start re­pay­ing loans un­til they earned £25,000, up from the cur­rent £21,000 thresh­old. In ad­di­tion, max­i­mum tu­ition fees will be frozen at £9,250 for the next aca­demic year, be­gin­ning in au­tumn 2018.

More dras­tic changes may also be on the hori­zon af­ter this news­pa­per dis­closed that Jus­tine Green­ing, the for­mer ed­u­ca­tion sec­re­tary, had op­posed Tory plans to cut fees ahead of last year’s party con­fer­ence.

Martin Lewis, founder of mon­eysaving­ex­ and a critic of the student loan sys­tem, said the penalty rate was “a psy­cho­log­i­cal prob­lem”. But he added that as most peo­ple were not ex­pected ever to pay off their loans, the added in­ter­est was un­likely to be a prac­ti­cal con­cern for most peo­ple.

“The Student Loans Com­pany should be high up on grad­u­ates’ list of com­pa­nies to con­tact when they change ad­dress,” he said.

Tele­graph Money has pre­vi­ously high­lighted the on­go­ing is­sues with grad­u­ates re­pay­ing their loans. Many dis­cov­ered they had paid off more than they ac­tu­ally owed – in some cases by up to £10,000.

In Novem­ber the Gov­ern­ment said it would work to fix the prob­lem by April 2019.

‘The fig­ures ex­pose a deeply un­fair sys­tem’

Soar­ing: some grad­u­ates are be­ing charged high penalty in­ter­est rates on their loans

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