The value of Government-owned student-loan debt to prospective buyers has been cited by Chancellor Philip Hammond as a reason not to reverse a retrospective freeze on the threshold at which graduates begin to repay their loans.

Responding to a Treasury Committee question by Labour MP Wes Streeting, who has been campaigning alongside MoneySavingExpert.com founder Martin Lewis for the Government to stop retrospective student loan changes, the Chancellor said "preparing the student loan book, ultimately, for sale as an asset sale" meant that the threshold freeze was unlikely to be reversed.

Hammond's admission comes just weeks after Martin accused the Government of behaving like a "payday lender" following its rejection of amendments tabled by Streeting to the Higher Education and Research Bill. These would've served to fully scrutinize the Government's U-turn on a promise to increase the 21,000/year student loan repayment threshold every year to reflect average earnings.

The Chancellor did, however, agree to hear the arguments against freezing the repayment threshold until at least 2021 and has promised to set aside some time for a meeting with Streeting and Martin in the New Year.

Read our Student Loan Mythbusting Guide for help on everything to do with student loans.

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What did the Chancellor say when asked to reverse the decision?

Speaking before the Treasury Committee yesterday (12 December), Streeting said to Hammond: "One of the issues I have been campaigning on with Martin Lewis from MoneySavingExpert is another decision that was taken by your predecessor (George Osborne), which was a small, from a Treasury savings point of view, but significant decision to make retroactive changes to student loan repayment conditions, in particular freezing the threshold at which graduates would begin to repay from next year, when it was due to rise in line with average earnings.

"There are a number of principal concerns we have about this, not least confidence in future promises made, as well as the previous promises made. In the spirit of Christmas, I wonder if you might agree to give up 30 minutes of your time to meet with me and Martin to talk through some of our concerns and whether we might persuade you to revisit that decision ahead of the Budget, before the decision kicks into practice."

However, Streeting's plea for a rethink on freezing the threshold was given short shrift by the Chancellor who, along with mentioning the future sale of the student loan debt, also highlighted the fact that the decision formed part of the Government's "overall fiscal consolidation".

He said: "I would have to be frank with you and say I do not see scope for reversing that decision. It is an important part of our overall fiscal consolidation and, of course, it is also about preparing the student loan book, ultimately, for sale as an asset sale.

"I believe that student loans represent a very favourable arrangement - a very favourable structure for financing students through higher education - but of course I am always happy to meet with colleagues in the run-up to the Budget.

"I would be very pleased to hear the arguments, but I would not want that to be interpreted as any indication that there is likely to be any change in this area. I would be happy to meet with you in the New Year."

Watch the Chancellor's response to Streeting's question here:


Hammond's rebuff 'hugely disappointing news'

Responding to the Government's latest snub, Martin said: "While I welcome the chance to go and meet the Chancellor to put forward the case, this is hugely disappointing news. The fact that he seems willing to put the interests of City debt traders before millions of students is a sad indictment of the state of affairs we have.

"Quite simply, these students signed up to a contract, that contract and the terms that were promoted at the time should be honoured by our Government. I wonder how those who are buying this debt would feel if the Government then later reneged on its contract with them?"

Six things you need to know about this retrospective student loan hike

1. The Government said it would increase the student loans threshold each year.
First-time undergraduates in England who started on or after September 2012 repay at 9% of everything earned above 21,000. In 2010, when it launched the new system, the Government promised that from April 2017 this 21,000 threshold would rise annually with average earnings.

2. In October 2015 the Government reversed that, freezing the threshold until at least 2021. So instead of the threshold going up each year, it'll be stuck at 21,000. This will leave more than two million graduates paying 306 more each year by 2020/21 if they earn over 21,000.

3. The Government consulted on it and 84% of responses were against freezing the threshold. Only 5% were in favour, yet it went ahead anyway.

4. Freezing the threshold means many students pay more. For example: if you earn 23,000 and the threshold had increased to 23,000, you'd have repaid nothing, yet as it's stuck at 21,000 you repay 180 a year.

5. While it'll add to the cost for lower and middle earners, higher earners gain from this. Most students won't repay in full within the 30 years before the loan is written off. So this change means they'll simply pay more without clearing the debt early. Yet the highest-earning graduates will pay it off quicker, saving on interest. Thus this is a regressive change.

6. This is a retrospective change even those who have already graduated pay more.
Quite simply students signed up to one deal and have been given another that's worse for the vast majority of them.

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