The government is planning to change student loans so grads have to start paying back earlier

Is this…punishing young people for never voting Tory?


The government is planning to reduce the salary level at which graduates start paying back their student loans – a move which could cost fresh grads hundreds of pounds a year.

Graduates currently start paying back their student loan when their salary hits £27,295. Any changes would mean newly-affected grads would be paying an effective marginal tax rate of over 50 per cent, when coupled with the new increase in National Insurance.

A mooted change to a £23,000 threshold would cost a grad earning the current £27,295 over £800 a year. The FT reports that lowering the threshold to £20,000 a year is considered to be a “bit low”.

It’s a bid to save the treasury money, with the Institute for Fiscal Studies predicting that a reduction to £23,000 would save the government £2 billion a year. Around half of the money lent as student loans is never paid back – instead it is written off after 30 years.

A reduced threshold was proposed as part of the Augar review, which also suggested cutting maximum fees from £9,250 to £7,500 a year.

Former universities minister Chris Skidmore told The Times he was in favour of the proposed cut. “I think this was always the plan. It certainly is the easiest, least complicated and fastest means by which to reduce additional costs on the taxpayer and ensure that the reform can be easily communicated to the public,” he said.

“I expect the threshold will be set at median national earnings. After all, it would be hard to argue why someone earning that wage should not start to pay back their fees.”

Department for Education said: “The student loan system is designed to ensure all those with the talent and desire to attend higher education are able to do so, whilst ensuring that the cost of higher education is 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.”

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