Kimberley Bond
Graduates, look sharp – seismic changes are being made to the current student loan system.
The Conservative government have announced major changes to reduce the staggering level of student debt in the UK.
However, critics of the changes believe the new rules will hit the poorest graduates the hardest.
University graduates that start their degrees from next September will now start having to pay nine per cent of what they earn above £25,000 a year – down from the current threshold of £27,295.
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This will have significant effect on disposable incomes as more will have to be paid back.
The time given to graduates hoping to pay off their student loans has also been extended to 40 years, rather than 30 – meaning graduates could be fighting to clear their debts well into their 60s.
Martin Lewis of MoneySavingExpert.com has suggested inflation may also lead to a double whammy on our wallets.
“Everyone who earns above the threshold will repay more each year than under the current scheme, typically by £207/year – reducing disposable incomes,” he explained.
"This also will mean many lower to middle-earning university leavers will repay more in total as they will be repaying more each year and doing it for all or most of the 40 years.
“The majority of lower and mid earners will keep paying for many more years, increasing their costs by £1,000s.
“Yet the highest earners who would clear within the current 30 years won’t be impacted.”
The government has also confirmed that tuition fees will remain at £9,250 a year for a further two years - up to and including 2024/25.
Shadow Education Secretary Bridget Phillipson has been scathing about the changes.
“The Tories are delivering another stealth tax for new graduates starting out on their working lives which will hit those on low incomes hardest,” she said in response.
“Instead of fixing the broken system these changes simply store up problems for the future. Ministers are kicking the can down the road while seeking to limit young people’s aspirations to study at university.”