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Student loan repayment threshold increases

Graduates will see a drastic benefit after years of crippling fees

Former students will now be able to earn more money before paying back their tuition fee loans.

Back on 1st October last year, Prime Minister Theresa May announced the repayment threshold increase.

She also announced that, after listening to the voters, the fees themselves would be frozen at £9,250 a year. This came after a series of rises by universities.

In February, May then launched a review of university funds and tuition fees. She pointed out that students in England face ‘one of the most expensive systems of university tuition in the world’.

This led to the repayment rise.

“The government says that this change could save graduates up to £360 a year.”

Students from England and Wales who have taken out student loans since September 2012 (when the fees rose to £9,000 a year in England) will not have to pay back their loan until they are earning £25,000 a year instead of £21,000.

The government says that this change could save graduates up to £360 a year. While the National Union of Students (NUS) said that the move will be a ‘welcome relief’ for many.

The Department for Education has pointed out just how many will benefit from the change, saying around 600,000 graduates will benefit over the next financial year alone.

This change will also benefit those who earn over £25,000 as the percentage of their salary will be paid back in a smaller amount.

The Institute for Fiscal Studies carried out research which found that raising the repayment threshold to £25,000 will benefit middle earning graduates the most. They could save up to £15,700 in repayments over their lifetime.

The lower earning graduates, however, will see fewer benefits. Those who are likely to earn below the threshold for a large amount of their career will see a smaller reduction in payments.

It will also make little difference to high earning graduates who would repay their loan in full. This change will simply mean that they have a longer period of time to make the repayments.

‘Overall, repayments will fall by around £10,000 for the average graduate as a result of the threshold increase’ says Laura van der Erve, an economist from the Institute for Fiscal Studies.

‘This will significantly increase the long run cost to the government of providing higher education. The long-run cost to the government will increase by more than £2bn a year, an increase of nearly 40%’.

The NUS Vice President for higher education, Amatey Doku, said ‘in making this change, the government has at least acknowledged that there are serious flaws in how we fund higher education in this country’.

‘I hope that this will not preclude a more in-depth consideration as part of the upcoming review into post-18 funding, lest this becomes patching up the holes on a sinking ship’.

However, Doku pointed out that the change in tuition fee loans did not address the issue of living costs, which is still a large issue for low-income families and students.


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