UK Government makes student loan reforms

Niamh Cherrett looks at the new plans for student loans in the UK

THE government’s recent student loan reforms have come to spread panic throughout student communities. From recent conversations I’ve had, however, the change seems to have been enveloped in confusion. The tangible impacts have been lost to public opinion, yet despite this, the discontent they have produced is evident.

To understand this radical change it is crucial to identify its key components. First, it will lower the earnings threshold for loan repayments to £25,000 — a decrease from the standing £27,660. There will also be an extension of the repayment period, meaning that one will now have to repay for 40 years instead of 30. And finally, there will be a change in the future earnings threshold from the rate of average earnings growth to match the rate of RPI (retail price index) inflation. All of this basically means that the graduate will be paying more, for longer, and from an earlier point. This change will take effect from the 2023 academic year, so will impact anyone beginning their degree from September.

The government claims that through this change they will save the taxpayer billions, as well as allowing more students to pay off their student loans. Currently, the notion of paying off all of my loan seems absurd.

Martin Lewis acknowledged that only 17 per cent of graduates currently achieve this, with the remaining 83 per cent stripped of their debt after

30 years. The Institute for Fiscal Studies has reported that under the new system “more than 70 per cent of graduates can expect to repay in full and will receive no taxpayerfinanced write-off of their loans.” This seems positive, and thus begs the question of why it is still being so badly received. The gov ernment claims that it is simply a matter of mediaspread misinformation. But they also fail to see how their reform will actually land with the average person.

It is indisputable that the taxpayer will be saved money. Yet this simply distracts from the disproportionate impact the reform will have on low to middle earners. For the people who can afford to, the new repayment period will allow them to pay off their loan and escape the exponential interest rates.

However, the average earner cannot achieve this.

The Observer stated, “The government’s own figures reveal that lowerpaid earners will see total repayments increase by up to 174 per cent” from the current system, as those interest rates will be detrimental to the earner that has to wait to pay off their loan.

The government has again disputed this claim. In their response to media contention, they claimed that, “we are still protecting the lowest earners. Anyone earning under £25,000 won’t repay anything”. But do they forget that you can earn more than £25,000 and still be a relatively low earner? Or that the notion of the low earners repaying more than the wealthiest is fundamentally unequal? Given the recent, and ongoing, strike action, it seems ludicrous that the government have issued something which actively damages those discontented. Teachers and nurses are among those already unhappy, and are careers that the government are having to promote in the face of such a bureaucratic system.