Some students ‘will be better off’ when fee cap trebles

Deferring university entry until 2012, the first year of the new fees regime, may save some graduates money, finance experts have claimed.

August 15, 2011

The Independent Student Finance Taskforce released an analysis today showing that low-earning graduates might be better off under the new system than under the current set-up.

That is because graduates who start university in 2012 will only begin repaying loans when they earn over £21,000 a year – compared to the existing threshold of £15,000.

A graduate earning £25,000 a year would be more than £300 a year better off under the post-2012 arrangements, the taskforce claims, paying £360 a year compared to £675.

The information has been released ahead of A level results on 18 August, with many predicting a scramble for places as students bid to avoid paying tuition fees of up to £9,000 from next year.

Martin Lewis, head of the taskforce and founder of the website MoneySavingExpert.com, said: “The political spittle that's flown about this system would make you think every student without fail will be worse in every situation under the new system compared to now.

“Of course though, with bigger fees, higher interest rates and longer repayments, those who earn higher salaries in the years after university will certainly end up paying substantially more in total.

“Yet while 2012 starters have much higher fees and higher interest rates, they only have to repay if they earn over £21,000 – much higher than is likely for 2011 starters.

“This means those above the repayment threshold in 2012 will likely have over £300 a year more disposable income than 2011 starters.

“And those who don’t gain financially from their university education and have lower salaries may end up paying less in total (within the 30 years before the debt wipes) because of the higher threshold.”

The new analysis follows warnings by the taskforce that students should not favour a £6,000 a year course over one with fees of £9,000 a year, because many graduates will never pay off debts – which will be written off after 30 years.

jack.grove@tsleducation.com

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