Graduates’ fury at plan to make them pay back loans earlier
STUDENTS are furious over ‘regressive’ plans to make lowearning graduates pay hundreds more back on their loans to boost Treasury coffers.
Chancellor Rishi Sunak is considering lowering the salary threshold for when repayments are triggered from the current £27,295 to £23,000.
It will drag many more graduates into earlier repayments and cause higher earners to pay larger amounts.
The Institute for Fiscal Studies (IFS) branded it ‘effectively a tax rise’ and said someone on £30,000 would pay £400 more each year. Anyone starting on £23,000 would repay around £8,000 more over their lifetime, financial experts said. And with the recently announced 1.25 per cent National Insurance (NI) rise, anyone earning more than the new threshold would have a total marginal tax rate of 42.25 per cent from next April.
Last night the National Union of Students (NUS) slammed the plan as ‘unjust’ and a senior Tory MP said it ignored the fact that universities deliver a ‘halfhearted service’.
The threshold reduction was recommended in the Augar post-18 review of education funding and would save the public purse £2billion a year.
Graduates currently repay 9 per cent of earnings above the threshold and after 30 years the balance is written off. Many will never earn enough to pay off their loan, which averages at £45,000. Reducing the threshold would drag millions into earlier repayments in their careers, meaning they will repay more in total. The £23,000 threshold was the median non-graduate wage when the idea was drawn up in 2019 by the Augar review body.
Former universities minister Chris Skidmore said yesterday it was ‘always the plan’ as it will ‘reduce costs on taxpayers’.
But Robert Halfon, Tory chairman of the Commons education committee, said: ‘£23,000 is not a lot of money. If students were guaranteed good skilled jobs at the end with high wages and were getting good face-to-face teaching then I would have less of a problem. But at the moment students seem to be getting a half-hearted service.
‘They are putting the cart before the horse. They need to fix the broken university system first. Then work out the finance.’ NUS vice president Hillary Gyebi-Ababio added: ‘This burden targets people earning lower incomes – after 18 months of hardship. The injustice is simply astounding.’
Jo Grady, of the University and College Union representing lecturers, said: ‘It is a regressive move that will hit lower earners hardest, as they will see the largest relative increases to their payments.’
A spokesman for Save The Student, a money advice website, said: ‘It almost feels as though the Government is actively trying to rub salt into the wounds of young people.’
Ben Waltmann of the IFS said: ‘It is effectively a tax rise. This would be a substantial burden especially on young graduates, who may be saving up for a deposit or starting a family.’
Investment firm Hargreaves Lansdown said it would mean a graduate starting on a £23,000 salary would have to pay an extra £8,222 towards their loan than under the current regime, taking into account inflation and assuming wages rise annually by nearly 3 per cent.
Mr Sunak wants to overhaul student financing in his spending review before next month’s Budget, according to the Financial Times.
‘The injustice is simply astounding’