Students face early loan settlements as Rishi Sunak plans to increase treasury by lowering salary threshold for when repayments begin
- Chancellor Rishi Sunak Reportedly Considering Lowering Salary Threshold
- Refunds would change from the current £27,295 to £23,000, saving billions
- National Union of Students said it would be ‘totally against’ such a cut
Graduates could be forced to repay their student loans earlier in their careers under government plans unveiled last night.
Chancellor Rishi Sunak is reportedly considering lowering the salary threshold for repayments from the current £27,295 to £23,000, a move that would save the Treasury as much as £2 billion a year.
The National Union of Students said it would be “totally opposed” to such a cut, and its vice president of higher education, Hillary Gyebi-Ababio, told the Financial Times: “The injustice is simply astonishing.”
Chancellor Rishi Sunak is reported to be considering lowering the salary threshold for when repayments are triggered from the current £27,295 to £23,000
The average student now graduates with debt of around £45,000.
The debt is written off after 30 years and the government estimates that more than half of the loans will never be repaid.
Henry Parkes, an economist at the Institute for Public Policy Research think tank, said the move is “virtually indistinguishable from a tax hike targeting only young workers.”
But some believe that the current system puts too much of a burden on public finances.
Nick Hillman, director of the higher education think tank HEPI, said forcing graduates to start repaying early would deliver “very significant” savings “without serious damage to on-site services.”
The Ministry of Education said the student loan system is “designed to ensure that anyone with the talent and desire to pursue higher education can do so, while ensuring that the cost of higher education is shared fairly between graduates and the taxpayer’.
The average student now graduates with debt of around £45,000. Debts are amortized after 30 years
It said it continued to consider the recommendations in the Augar review of post-18 education, which two years ago recommended lowering the repayment threshold to £23,000 – but also proposed to share some of the burden for students by lowering tuition fees.
In addition to saving money, the government believes reforming the student loan system would encourage more teens to opt for cheaper and more practical vocational training over a degree.
Ministers believe that improving skills across the country is key to the ‘levelling’ agenda.
Former Skills Minister Gillian Keegan said before the recent ministerial reshuffle: ‘We want people to think about their options – it’s a big investment decision.’