Graduates could end up paying back
thousands of pounds extra on their tuition fee loans under government proposals
to alter the system, according to research.
It
suggests that women are more likely to be affected than men, while those from
poor backgrounds could be hit the hardest.
The new study, published by the
Sutton Trust, looks at plans laid
out by the chancellor, George Osborne, in the summer budget to change the
student loan repayment system.
Under the
proposals, which are open for consultation, ministers are considering freezing
the level at which graduates start to repay their loans at £21,000 for five
years from 2016.
This move,
the government’s preferred option, would affect those who took out loans from
2012 onwards.
It was
expected that from next year, students would pay back loans when earning
£21,000 – a system introduced when
tuition fees were trebled to a
maximum of £9,000 three years ago, with this salary updated annually in line
with average earnings.
The new
research report, by higher education consultant John Thompson, argues that
freezing the repayment threshold, as well as other proposed changes such as
replacing maintenance grants designed to help poorer students living costs with
loans, could significantly increase the cost of going to university.
It concludes
that on average, if the £21,000 threshold is frozen under the government’s
preferred option, the overall average extra repayment for a typical borrower
would be £2,800 over 30 years.
There
would also be a difference between the genders, it claims, with women paying
back an extra £3,300 on average, compared to £2,300 for men. This is because
women tend to have lower earnings and are more likely to be paying back money
across the full 30-year borrowing period. Loans are written off after this
point.
It goes on
to argue that this move, alongside planned changes to maintenance grants, will
have a strong impact on low income students, who could see their average debt
rise to more than £50,000.
The report
concludes that loan terms for current borrowers should not be changed, and that
new borrowers should be given definite terms that will apply to the full
repayment period.
“The
freezing of loan thresholds will significantly increase the average cost of
higher education, particularly for students from low income backgrounds who are
currently eligible for maintenance grants,” it says.
“Yet even
bigger risks arise from the uncertainty that has been created. The danger is
that this will have an adverse effect of the willingness of young people to
take out the student loans.”
Sutton Trust chairman Sir Peter
Lampl said: “Freezing the repayment threshold for student debt will add to
graduates’ already heavy financial burden.
“The fact
that this measure will adversely affect low earners and graduates from low
income homes, who are already being penalised by the budget shift from grants
to loans, is a serious cause for concern.”
A Business
Department spokesman said: “We want our world-class higher education loan to
remain financially sustainable and welcome responses to our current
consultation on the threshold for student loan repayments.
“Our
reforms to student finance will mean that students from low income backgrounds
receive a substantial increase in the cash-in-hand to help with living costs
whilst at university.”
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