Middle-class students to pay more under Osborne plans

GEORGE OSBORNE’S proposal to freeze the student loan repayment threshold will hit middle-class graduates hardest and increase the overall cost of higher education, a think-tank has warned.

The Chancellor announced the plans earlier this month along with proposals to scrap university grants and replace them with loans. The moves were labelled “draconian” by the National Union of Students.

The Institute for Fiscal Studies (IFS) has calculated that freezing the repayment threshold for students at £21,000 for five years will hit middle-income graduates hardest because they will end up paying more per year.

It also estimated that a student on median graduate earnings “will repay over £6,000 more in total in 2016 money”.

The study found that the policy, if implemented, will represent a three per cent drop in the Government’s contribution to higher education. The IFS also found that the poorest 40 per cent of students going to university in England will graduate with debts of up to £53,000 — up from £40,500 — as a result of the decision to replace maintenance grants with loans.

Jack Britton, a research economist at the IFS, said: “The switch from maintenance grants to maintenance loans will result in substantially higher debt for the poorest students.

“For most, though, it is the freezing of the repayment threshold which will do more to raise loan repayments.”

Nick Hillman, from the Higher Education Policy Institute, said the freeze in repayment thresholds “will reduce the cost of student loans and bring the system back in line with the way it was meant to work, but it will mean bigger repayments from middle-income graduates while the poorest and the richest are unaffected”.

A spokesman for the Business Innovation and Skills Department said the increase in tuition fees in 2012 had not deterred students from deprived backgrounds, who were applying for university in record numbers.