Huge shake-up in student loan repayments to hit millions of young people

Millions will suffer from a new “invisible tax” in line with government plans to force young people to start paying off their debts. loans earlier to lower the high level student duty.

The move is part of the government’s response to the 2019 Augar Review, which calls for major changes in education after age 18.

Education Secretary Nadhim Zahavi said the system would create a fairer system for youth and taxpayers.

Whereas critics have said that the shake-up in student funding will hit poor students.

Here’s what you need to know about the government’s changes to student loans and what else they’re considering.

What are the new student loan reforms?

University graduates starting next September will start paying off their debt when they earn more than £25,000 a year – up from £27,295.

The existing threshold will be maintained for current students until April 2025.

The period in which graduates must repay their loan will be extended to 40 years, meaning that some of them will pay off their student debt up to 60 years.

Currently, outstanding debt is written off after 30 years, so only 23% of students repay the loan in full.

But the change in plans will mean that 52% of borrowers will repay their loans, according to the Ministry of Education.

What other measures are being considered?

The announcement, made on Thursday, February 24, included plans to cut the cost of foundation courses and a new National Government Scholarship that aims to support successful students from disadvantaged backgrounds in accessing higher education, further education and internships.

The consultation will consider eligibility for a Lifetime Loan (LLE) of around £37,000 or the equivalent of four years of study after age 18 to help students learn, study, retrain or upgrade at any stage.

Education Minister Nadhim Zahavi said: “Our nation’s leading universities and colleges are playing a key role in expanding opportunities by providing access to a range of lifetime flexibilities for over 18s to help people learn, retrain and advance their skills.

Ministers will also publish a consultation on whether to introduce minimum entry requirements: GCSE Level 4 passes in English and Maths or two E’s at A-Level.

This means that students who fail the GCSE math and English exams or who achieve lower A-Levels may be denied student loans.

About 4,800 university students did not receive these GCSE passes last year.

What was ignored?

Despite a call to cut tuition fees to £7,500 a year, the Tories silently rejected the proposal.

Instead, they decided to keep the annual ceiling at £9,250 until 2024/25.

The student loan interest rate will be set at RPI + 0% for new borrowers starting courses from 2023/24.

High demands for the return of maintenance subsidies for poorer students, which were canceled in 2016, were also ignored.

Why are reforms taking place?

The new measures are part of efforts to reduce high levels of student debt, which totaled £161bn at the end of March 2021.

It is projected to grow to £500 billion by 2043.

The Minister of Education supported the reforms as measures that would greatly benefit students, open up new opportunities and balance the burden of loans.

The Minister of Education said: “This package of reforms ensures that students are offered a range of different paths, whether through higher or further education, that offer opportunities with better outcomes – and end high interest rates once and for all. on your student loans.

“I am delighted to see such a significant amount of investment – ​​nearly £900m – backed up by a revised, fairer and more sustainable student funding system that makes higher education accessible and accountable.”

He added that the changes “will more fairly balance the burden of student loans between the student and the taxpayer and ensure that future graduates do not pay back more than they borrowed in real terms.”

What do they say about the new reforms?

The Education Minister’s colleague from the Labor Party, Bridget Phillipson, does not support the new Tory reforms, accusing them of creating new problems.

She said: “The Tories are imposing yet another hidden tax on new graduates starting their working lives, which will hit those on low incomes the hardest.

“Instead of fixing a broken system, these changes simply accumulate problems for the future. The ministers are trying not to rest on their laurels, seeking to limit the desire of young people to study at the university.”

She said it was “insulting” for the government to award a degree for which young people work hard.

Martin Lewis, founder of, has warned that most university graduates will pay thousands of pounds more in their lifetime than they currently do. “For most, it’s effectively a lifetime tax on graduates,” he said.

“Only about a quarter of current graduates are projected to earn enough to pay off the loan in full. Extending this period means that most low- and middle-income workers will continue to pay for many more years, increasing their spending by thousands.”

On plans to ban students with lower grades, Sir Peter Lampl, executive chairman of the social mobility charity Sutton Trust, said they are more likely to receive lower grades due to the shortcomings they have experienced in school.

Geoff Barton, general secretary of the Association of School and College Leaders, welcomed efforts to address the issue, but warned that higher education cannot be “the preserve of an academic elite.”

He said: “We cannot avoid the conclusion that these reforms represent an attempt to save money by reducing the number of students accessing tertiary education and extending the loan term so that they pay more.

“The appeal to the Treasury is obvious, but our most disadvantaged young people will suffer the most again.”

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