Fall Budget: Former Conservative Education Secretary Urges Chancellor To Lower Income Threshold For Student Loan Repayment | Politics News
A former conservative education secretary wants Rishi Sunak to push forward proposals to lower the income threshold for student loan repayments, despite opposition from other party figures.
The government is looking at the recommendations set out in the 2019 Augar review that deductions for student loan repayments should be applied once a person earns £ 23,000 instead of the current rate of £ 27,295.
Lord Baker of Dorking, who served as education secretary under Margaret Thatcher, told Sky News he “strongly” supported the proposed cut.
“Would be students should realize the obligation they will assume, ”said Lord Baker.
Augar’s review said the current income threshold meant too many people with student loans were not required to make repayments, resulting in significant costs to taxpayers. He recommended that the threshold be aligned with the median earnings of non-graduates.
But Justine Greening, another former conservative education secretary, told Sky News that introducing such a policy would widen the equality gap in education even further.
Ms Greening, who resigned as an MP in 2019, said such a change could lead students from disadvantaged backgrounds to view the university as unaffordable.
“Upgrade is obviously removing barriers to higher education rather than putting them in place, and the great risk with this potential change that is being reported is that, in fact, rather than closing the equality gaps in education, it roots them even more, ”said Ms. Greening.
“And that potentially means fewer students from disadvantaged backgrounds who think it’s affordable to go to college.”
The former Putney MP added that lowering the threshold for student loan repayments would be a “very regressive” measure that “would hit the lowest paid graduates the hardest.”
Urging the government to consider a “graduate contribution scheme” instead, Ms Greening told Sky News: “My position is that if the government believes that graduates should contribute more, it should make this change in a gradual and fairer manner. – not hit the hardest on graduates of the lowest paid careers after universities. “
The former education secretary also said maintenance grants – cut in the 2015 budget – should be reintroduced, adding: “This is one of the reasons why students from the poorest families are the more indebted and if we are to see a race to the top in Britain, this is clearly an injustice that needs to be addressed. “
Senior Conservative MP Robert Halfon, who chairs the Commons Education Select Committee, warned that “the cart is put before the horse” and that the government should ensure that universities provide value for money to students. undergraduates via a “new student guarantee” before considering lowering the reimbursement threshold.
“We need to move to a graduate tax and lower interest rates to make it fairer,” said MP for Harlow.
“To me the system is bad and in need of fundamental reform – and the fairest way to do that is to put in place a graduates tax that is progressive.”
Currently, English and Welsh undergraduates who started university in 2012 or later benefit from so-called ‘plan 2 loans’ and pay back 9% of whatever they earn. above £ 27,295 once they’re done. University.
These people continue to repay that same 9% until the loan is paid off in full or up to 30 years after leaving college, after which the remainder of the amount owed is written off.
Universities in England can charge up to £ 9,250 per year, while universities in Wales can charge £ 9,000. Scottish students do not have to pay to study at Scottish universities.
The amount an individual pays back depends on what he earns and is deducted directly from his salary – but graduates also reimburse interest on their loans.
The interest rate changes annually in September and is based on the Retail Price Index (RPI) inflation rate for the year prior to the previous March.
The RPI inflation rate was 1.5% in March 2021, and interest is currently charged between 1.5% and 4.2% on student loans, depending on a person’s income.
If ministers lower the income threshold at which graduates must start repaying their loans to £ 23,000 in this month’s budget and repayments continue to stay at 9% of income – that would mean students earning a salary annual £ 30,000 would pay around £ 400 more per year.
It is estimated that lowering the threshold would save the government around £ 2 billion, but it is unclear whether the proposals could include retrospective application of this change to graduates who have graduated and are already repaying their loans. .
The Augar review also recommended that graduates should repay their student loans over 40 years instead of the current 30 – it’s unclear if this is also being considered by the government.
A report by the Institute for Fiscal Studies (IFS) released in September warned that lowering the student loan repayment threshold would hit graduates with average incomes the hardest.
Ben Waltmann, senior research economist at IFS, told Sky News that the policy would “actually increase taxes for middle-income graduates” and place a “substantial burden” on some students.
“Under this policy, a graduate earning £ 30,000 per year would have to pay around £ 400 more per year,” Mr Waltmann said.
He noted that the sum would come on top of the recently announced 2.5% increase in national insurance contributions under the government’s plans for health and social services – with employees and businesses all being both subject to an increase of 1.25%.
Mr Waltmann said the proposal could have an impact on “middle-income young graduates who might be saving for a deposit or trying to start a family” and that there are “other ways” to increase income.
He added that he could not rule out the possibility that lowering the loan repayment threshold would reduce the number of students applying for courses in the 2022/23 academic year – but that the effect on the total number of students would probably be low.
University and College Union secretary general Jo Grady told Sky News the move would be “regressive” and agreed that it could deter less privileged students from going to college.
“Lowering the threshold at which graduates repay student loans is a regressive measure that risks deterring less privileged students from entering higher education,” she said.
“Instead of imposing a heavy debt on the lowest paid graduates, the Chancellor should seek secure public funding that ensures higher education and higher education are fully accessible to all.”
She added: “The COVID The pandemic has exposed the flaws of a university system based on competition, markets and debt, with many institutions prioritizing fees over health and safety. If the government is serious about “raising the bar” of the country, it must ensure that decisions about what type of education to pursue are not based on fear of debt. “
And NUS Vice President for Higher Education Hillary Gyebi-Ababio said: “We would be totally opposed to any plans to reduce the salary threshold for student loans.
“Like the government’s decision to increase national insurance contributions, this burden targets low-income people – after eighteen months of such hardship, and with the looming rise in energy prices expected to hit low income levels. millions of the most vulnerable this winter, the injustice is nothing short of staggering. “
Posted on social media, Labor Universities Minister Matt Western said the move would “widen the gap” between wealthy and less fortunate students and “those who [the] the lowest and middle incomes end up paying around £ 10,000 more ”.
But Nick Hillman, director of the Higher Education Policy Institute think tank, told Sky News that if the Treasury wants to cut spending, the idea is “a much better way to do it than most alternatives.”
“We have been very clear that education spending should not be cut in times of crisis,” Hillman said.
“But if the Treasury is determined to cut spending, given the country’s poor financial situation, then that’s a much better way to do it than most alternatives – like cutting student places, which would be terrible for young people, universities and countries. “
A spokesperson for the Department of Education told Sky News that the student loan scheme was designed to ensure that anyone with the talent and desire to pursue higher education can do so, while ensuring that the cost or equitably distributed between graduates and the taxpayer.
“We continue to carefully consider the recommendations made by the Augar panel, while improving the quality of standards and educational excellence and ensuring a sustainable and flexible student funding system,” said the spokesperson.