Freezing loan repayment threshold ‘would cost average borrower £3K’

Women and students from poorer backgrounds to be hardest hit, says Sutton Trust analysis

September 24, 2015
Piggy bank drowning in debt

The government’s plan to freeze the student loan repayment threshold will cost the average borrower an extra £2,800, with women and graduates from poorer backgrounds being disproportionately affected.

That is according to the Sutton Trust, which is calling for the proposals – which would fix the salary at which graduates are required to start repaying their loans at £21,000 for five years – to be dropped. The government had previously said that the threshold would be increased “periodically” in line with average earnings.

In an analysis published on 24 September, higher education consultant John Thompson, who prepared the report for the trust, says that the reforms – announced in the July Budget and now under consultation – will cost graduates of English universities an additional £2,800 over the 30-year repayment period.

Women would be disproportionately affected by the changes, set to be introduced in 2016, because they tend to earn less than men. Mr Thompson said that men would repay an average of £37,100 over three decades, an increase of £2,300, while women would pay an average of £29,700, up £3,300.

If the government were to continue the freeze beyond 2021, the impact could be even greater.

The report adds that the situation could be exacerbated further by the government’s decision to scrap maintenance grants and replace them with loans from 2016-17 onwards.

The overall increase in repayments for grant-eligible students would be £3,000, but with a salary threshold freeze, this increases to £7,000, the report says.

Even bigger risks arise, the report says, from the impact that retrospective changes to borrowing terms could have on the willingness of future students to enrol in higher education.

An analysis published in July by the Institute for Fiscal Studies warned that the Budget would see the poorest 40 per cent of students in England leave university with debts of up to £53,000.

In addition to the dropping of the current proposals, the Sutton Trust recommends that new borrowers be given definite terms for the entire repayment period, and also that the thresholds for repayment and maximum interest be set in terms of a percentage of average earnings.

Sir Peter Lampl, the charity’s chairman, said there was still time for the government to drop “this particularly unfair measure”.

“Freezing the repayment threshold for student debt will add to graduates’ already heavy financial burden,” he said. “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.”

The consultation on the threshold change, which would save the government an estimated £1.4 billion on each student cohort, is still under way.

A spokesman for the Department for Business, Innovation and Skills said: “We want our world-class higher education system 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 cash-in-hand to help with living costs whilst at university.”

chris.havergal@tesglobal.com

You've reached your article limit

Register to continue

Registration is free and only takes a moment. Once registered you can read a total of 3 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments
Register

Have your say

Log in or register to post comments

Featured Jobs

PhD Scholar in Medicine

University Of Queensland

Manager, Research Systems and Performance

Auckland University Of Technology

Lecturer in Aboriginal Allied Health

University Of South Australia

Lecturer, School of Nursing & Midwifery

Western Sydney University

College General Manager, SHE

La Trobe University
See all jobs

Most Commented

women leapfrog. Vintage

Robert MacIntosh and Kevin O’Gorman offer advice on climbing the career ladder

Woman pulling blind down over an eye
Liz Morrish reflects on why she chose to tackle the failings of the neoliberal academy from the outside
White cliffs of Dover

From Australia to Singapore, David Matthews and John Elmes weigh the pros and cons of likely destinations

Mitch Blunt illustration (23 March 2017)

Without more conservative perspectives in the academy, lawmakers will increasingly ignore and potentially defund social science, says Musa al-Gharbi

Michael Parkin illustration (9 March 2017)

Cramming study into the shortest possible time will impoverish the student experience and drive an even greater wedge between research-enabled permanent staff and the growing underclass of flexible teaching staff, says Tom Cutterham