Students will face £100k bill for degrees and won’t pay off loans until retirement
Reforms ‘will hit lower earners hard,’ says one Labour MP
Students who withdraw £45,000 in student loans could end up paying back up to £100,000, and are likely to be saddling the debt well up to retirement age.
The government has announced dramatic reforms to the student loan system that will come into effect in September 2023.
Currently, graduates must start loan repayments when their salary reaches £27,200.
For students who begin uni the 2023/24 academic year, this threshold will be reduced to £25,000.
For current students, outstanding student loan debt is written off after 30 years, but for future undergraduates, this window has been increased to 40 years.
Analysis by The Times demonstrates that a university leaver on an average starting salary of £24,000 that increases by two per cent each year would, under the current system, pay back £47,000. Under the new reformed system, the same student would pay back £101,000.
Martin Lewis, founder of MoneySavingExpert.com said: “The plans will see most university leavers pay far more for their degrees over their lifetime than they do now.
“It effectively completes the transformation of student ‘loans’ for most, into a working-life-long graduate tax.
“The decision to extend repayments to 40 years, combined with the other measures, will leave most who start university straight after school still repaying it into their 60s.”
He adds: “These changes won’t hit current or former students, meaning at least, that all those who will pay under the new system should be aware of it before they sign up.”
Education secretary Nadhim Zahawi said: “There are some who hope that we can enhance our great universities and educate ever more students while ignoring the financial realities. This hope is a mirage, and this government was elected to take on the big questions.
“Taxpayers, most of whom have not been to university themselves, are funding 41p of every pound of student loans issued to full-time undergraduates.”
Universities minister Michelle Donelan said: “Our current debt on the student loan book is the equivalent of paying the total English council tax bill five times over.
“So it is important that we balanced this and put fairness in there for the taxpayer as well.”
Labour MP Paul Blomfield said: “Reducing the repayment threshold will hit lower earners hard as they face all the costs of setting up home at the start of their careers.
“Extending the repayment period is a massive transfer of debt from the Treasury to graduates.”
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