Reducing the income threshold at which graduates start repaying student loans would be “regressive” and place a “substantial burden” on young people, have warned education unions and economists.
The Financial Times reported that the government is planning to lower the salary level at which graduates start repaying their loans in an attempt to save treasury money on the student finance system.
Currently, graduates start repaying their loans when they earn £ 27,295 or more per year, but ministers are believed to be considering slashing that figure.
The Union of Universities and Colleges (UCU) warned against “increasing student debt” because it called the proposal “regressive.”
Meanwhile, an economist from the Institute for Fiscal Studies (IFS) said lowering the repayment threshold would be a “substantial burden” on young graduates.
It would be a big burden, especially for young graduates, who can save for a deposit or start a family
The Augar Higher Education Review in 2019 recommended that the repayment threshold be lowered to £ 23,000 and that graduates should repay their student loans over 40 years rather than 30 years.
In January, the government said further reforms to the student funding system, including minimum university admission requirements, would be “considered” before the next comprehensive spending review.
But an IFS report last week warned that lowering the student loan repayment threshold would hit graduates with average incomes the hardest.
Ben Waltmann, senior research economist at IFS, told the PA news agency: “As a large majority of graduates will never repay their student loans, lowering the repayment threshold to £ 23,000 is actually a tax increase for middle-income graduates worth almost £ 2 billion a year.
“Under this policy, a graduate earning £ 30,000 per year would have to pay around £ 400 more per year – in addition to over £ 500 more in national insurance contributions under health and welfare plans. social protection announced earlier this month (counting both employee and employer contributions).
“It would be a substantial burden, especially for young graduates, who can save for a deposit or start a family.”
Mr Waltmann called on ministers to increase their revenues instead by extending the repayment period for student loans or through the tax system.
Jo Grady, UCU general secretary, told PA: “Putting more debt on students is not the way to deal with the failure of the commodification of higher education.
“This is a regressive measure that will hit low-income people the hardest, as they will see the largest relative increases in their payments.
“The government should consider progressive taxes to publicly fund higher education. “
Hepi research shows that reducing the number of places as the number of young people leaving school increases so rapidly would be catastrophic, while asking graduates to reimburse more of the costs would be manageable.
Hillary Gyebi-Ababio, vice president of higher education at the National Union of Students (NUS), said: The impending rise in energy prices which is expected to hit millions of the most vulnerable this winter, the injustice is simply astounding.
“They should prioritize well, end the commodification of the higher education sector and remove tuition fees.”
But Nick Hillman, director of the Higher Education Policy Institute (Hepi), said asking graduates to reimburse more of the costs would be more “manageable” than other money-saving options considered.
He told PA: “My position is very clear. I don’t think we should cut spending on education in times of crisis.
“However, as the Treasury clearly has higher education spending in mind for the expenditure review, it is solely responsible for considering which cuts might be catastrophic and which might be manageable.
“Hepi’s research shows that reducing the number of places as the number of young people leaving school increases so rapidly would be catastrophic, while asking graduates to reimburse more of the costs would be manageable. Unacceptable perhaps, but manageable.
According to the Financial Times, Rishi Sunak would like to revisit student funding in his spending review ahead of next month’s budget.
Mr Hillman suggested that the government is “belatedly” realizing that the career options they want to lead people to tend to have lower incomes than degrees.
Mr Hillman said: “So they now realize that a lower income threshold is needed for their professional reforms to hold up. It’s a very strange reason to make the switch, but there you go.
A spokesperson for the Department of Education (DfE) said: “The student loan system is designed to ensure that everyone with the talent and desire to pursue higher education can do so, while ensuring that that the cost of higher education be equitably distributed between graduates and the taxpayer.
“We continue to carefully review the recommendations made by the Augar panel, while improving the quality of standards and excellence in education and ensuring a sustainable and flexible student funding system. “
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