Students will pay more if loan threshold frozen: Sutton Trust

Imposing a freeze to the level of income at which graduates must start to repay their student loan will cost students an estimated £2,800 more per year, according to the Institute of Fiscal Studies (IFS) and Sutton Trust studies.

The loans are paid back as a 9% of income once the threshold, currently an annual income of £21,000, is reached. The threshold increases year on year with inflation and changes to average earnings, which this policy aims to stop.

However, Osborne’s proposal is to block the threshold at which one starts paying back the loan at £21,000 for five years.

If enacted, the proposal targets lower and middle income students the hardest. Regardless of the slight increase in living support to low-income students, the poorest 40% of graduates will face an increase in debt from an average £40,500 to £53,000 by the end of a 3-year degree, said the same report.

The modification will allegedly impact women more severely than it would men, given that female graduates earn less on average than their male counterparts.

The new proposal determines a £3,300 increase in debt for women compared to £2,300 for men.

The Government’s bid was supposedly put forward as an attempt to cut education expenditure without eliminating student places, or reducing the amount of loans available.

The IFS report says: “The net effect is to reduce government borrowing by around £270 million per cohort in the long run in 2016 money – a 3 per cent decline in the government’s estimated contribution to higher education.”

The online consultation on the UK Government website closed on the 14th of October and students across the country wait for a resolution.

Charlie Hindhaugh, SU education officer, had this to say: “The reasons for proposing this freeze is an open admission that the way we fund Higher Education through debt is unsustainable. The Government are not getting back the money they anticipated from the £9000 fee regime, and are now punishing the students who took out loans for their own policy failure.

It is a particularly regressive policy that will affect every student who has taken out a loan since 2011 and will disproportionately affect women and BME graduates.”

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EDIT (08/11/2015): Comment added from Charlie Hindhaugh, SU education officer.