“The injustice is simply outstanding” says the National Union of Students on government proposal to slash the amount graduates must earn before repaying student loans.

The Financial Times has caused a stir, reporting that the government is planning on lowering the salary level at which graduates start repaying loans.

According to FT’s report, the chancellor, Rishi Sunak, is wanting to overhaul student financing in his spending review ahead of the autumn budget, which takes place on October 27.

The slashing of the amount a graduate has to earn before they start repaying student loan debt is due to Treasury concerns that the taxpayer is spending too much on funding university courses. Asides saving the Treasury some coffers, the move is aimed at driving more young people towards cheaper vocational education, FT reports.  

“That’s the plan”

As it stands, graduates begin to pay back student loans when they earn an annual salary of £27,295. Ministers are however looking to reduce that figure. As one minister stated: “That’s the plan.”

Tuition fees for university courses were tripled in 2012. Today, the average debt a student has incurred when they graduate is £45,000 in maintenance and tuition loans from the government. The loans are repaid with interest through a 9% cut of earnings. They are written off after 30 years.  

The figure of £23,000 is being circulated as the potential salary threshold at which graduates would start making loan repayments. This amount was, according to the government, recommended by the Post-18 review of education and funding report, commonly known as the Augur Review, in reference to Philip Augur, who chaired the independent panel who compiled the review in 2019.

The Institute for Fiscal Studies, which specialises in UK taxation and public money, says reducing the threshold to £23,000 is likely to save the Treasury just under £2bn a year.

New and existing students to be hit with a huge tax levy

From April 2022, those who have student debt and earn above the threshold to repay the loan, face a 49.8% tax on any increase in pay from employers.

Boris Johnson and Rishi Sunak’s national insurance hike will leave those with student debts paying out almost half of extra income in income tax, national insurance and student loan repayments. A graduate earning the current threshold of £27,295, would effectively see their pay cut by over £800 a year, when including the deductions from the National Insurance contributions hike.

‘Rocket fuel’ for Johnson’s ‘levelling up’ agenda

Government officials have said the savings in student loans would help boost plans to revolutionise technical and vocational training in Britain. In what has been described as ‘rocket fuel’ for Johnson’s so-called ‘levelling up’ agenda – the government’s programme aimed at improving opportunities in all parts of the country – the prime minister has promised new legislation aimed at reforming education for older teenagers and adults.

As the FT reports, the government is of the opinion that too many students are racking up debt studying what they consider ‘soft’ three-year university courses in the arts and social sciences. Technical training on the other hand is cheaper and would pay a faster economic dividend.

‘Totally opposed’

The news that the government wants to slash the threshold in order to save money and encourage more into vocational training and away from three-year university courses in ‘soft’ subjects, has been met with disproval.

The National Union of Students (NUS) has said it would be “totally opposed” to any reductions. Hillary Gyebi-Ababio, vice president for higher education at NUS told LFF:

“We would be totally opposed to any plans on reducing the salary repayment threshold for student loans. Like the government’s decision to increase National Insurance contributions, this burden targets people earning lower incomes – after eighteen months of such hardship, and with the looming hike in energy prices set to hit millions of the most vulnerable this winter, the injustice is simply astounding.

“They should get their priorities right, end the marketisation of the higher education sector and scrap tuition fees. The government must re-envision education, and begin to view it as a right for all, not a product that can be bought and sold for individual gain. Only then can we begin to build the student movement’s vision of a fully- funded, accessible, lifelong, and democratised higher education system,” Gyebi-Ababio added.

Many took to Twitter to announce their objections, including Christopher May, a retired professor, who points to how the policy is likely to impact graduates on lower paid cultural and social jobs the most.

“#BorisJohnson has his eyes on low(er) paid graduates’ wages; he seems to be considering lowering threshold for student loan repayment-start(s); alongside funding cuts for art and humanities, this looks serious for subjects whose graduates end up in low(er) paid cultural/social jobs,” he tweeted.

Martin Lewis, the financial journalist and broadcaster, points to a clause in the Augur review that the government is using as justification to the lowering of the student loan repayment threshold. The clause emphasises the unfairness to adjusting loan terms for existing borrowers, reading:

“We emphasise from the outset that it would be unfair to adjust terms retrospectively for existing borrowers and that the core recommendations in this chapter are proposed as a package that constitutes a new system of student contributions that would apply to future students after an implementation period.”

Students are also voicing their dismay over the proposals. As one former student tweets:

“National insurance increase AND a reduced student loan repayment threshold? Guess it’s a good thing I learned how to live on a student budget since that’s what I’m about to return to.”

Gabrielle Pickard-Whitehead is a freelance journalist and contributing editor to Left Foot Forward.

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