Lowering the student loan repayment salary threshold….

The government is proposing to reduce the salary threshold at which students start to repay their tuition and maintenance loans.

Presently, graduates only start repaying their loans when the start earning £27 000 a year, but this could be cut to £23 000.

Students pay back 9% of their salary above the threshold – so if someone is earnings £28K a year, they only pay back £90 a year, 9% of the £1000 above the current threshold of £27 000.

This move will obviously affect lower earners more, and will cost the average student and additional £400 a year in loan repayments and it is estimated that this will save the treasury over £2 billion a year.

Criticisms of this policy change

This will hit lower earners the hardest, bringing in anyone now earning from £23 000 to £27000. This also means graduates will start paying back sooner, even if this will be a relatively small amount in the early days of repayment.

This won’t affect higher earners as much because they are able to pay back faster and thus pay back less than people who get stuck in the £40-50K bracket of earnings, according to analysts from Money Saving Expert:

Those earning £50K a year are currently set to pay back more than those earning £55K a year – all the proposed changes will do is mean those earning £45K a year will end up paying more than those earning £55K a year.

This is because of the insane 5% interest on increasing student loan amounts. The current average student debt is a staggering £45 000 a year, and with interest on PLAN 2 loans (for students who started from 2021) set at RPI plus 3% (total interest currently around 5%).

Once you factor in interest the total amount repayable ends up being nearer £150 000 over 30 years, which means you won’t pay it off in the repayment period unless you’re a very high income earner.

There is also the fact that the proposal to lower the repayment threshold simply isn’t fair to impose on students who have just had their learning disrupted because of Covid and they are also facing reduced job prospects as a result of the Pandemic.

NB – the idea for lowering the threshold came out of a review in 2019 which also recommended lowering tuition fees to £7500 a year, which would help reduce this debt if implemented at the same time.

Signposting/ relevance to A-level sociology

This is an important update for students studying the education module, relevant to the education policies section of that module.

It’s also worth asking yourself whether it’s worth doing a degree, when you can do an Apprenticeship for free!

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