Millions of graduates will soon have to repay much more of their loans than they were initially told after the Government secretly backtracked on a promise – a move MoneySavingExpert.com founder Martin Lewis has branded "a disgrace".
Currently, students in England who started university from 2012 will pay 9% of everything earned above £21,000 a year (or £1,750/month pre-tax salary) once they graduate. See our Student Loans Mythbusting guide for the full information.
In 2010, the Government promised that from April 2017 this repayment threshold would be upped each year in line with average earnings. This meant graduates would have been spared having to repay more of their income towards their student loans, and fewer would have had to start repaying them in the first place.
It has now backtracked on the promise given to students, effectively hiking costs retrospectively. A move that, according to the Government, will mean more than two million graduates will end up paying £306 more each year by 2020-21 if they earn over £21,000.
Disgracefully, this wasn't announced by George Osborne in today's speech. Instead, it was buried on page 126 of the Autumn Statement.
This comes after announcing earlier this year that it would consult on freezing the student loan repayment threshold for five years – a move only 5% were in favour of.
There's no change for existing graduates from today's move.
'Disgraceful move by the Government betrays a generation of students'
Martin Lewis, founder of MoneySavingExpert.com and former head of the Independent Taskforce on Student Finance Information, has been vocal on the Government's plans to freeze the repayment threshold, and after the consultation launch he urged everyone to tell their MP to ensure the freeze would be stopped. MoneySavingExpert.com also submitted a consultation response.
In addition to his video above, Martin says: "This is a disgraceful move and a breach of trust by the Government that betrays a generation of students. It has chosen to freeze the repayment threshold even though 95% of the consultation responses did not support the freeze – what was the point of a consultation if when there's huge objection it does it anyway?
"It is risking fundamentally threatening any trust people have in the student finance system. It is one thing to set up a system that is unpopular but it is entirely different to make retrospective changes that mean you cannot even rely on what you were promised at the time you started to study. Even though it was warned of the huge dangers of doing this, it’s still blundering ahead, ignoring all right thinking concern.
"The fact that the Chancellor didn't even have the balls to put it in his Autumn Statement speech shows that he knew how unpopular it would be. If a commercial company made retrospective changes to their loan terms in this way they’d be slapped hard by the regulator – the Government shouldn't be allowed to get away with it either.
"I'm deeply saddened it's chosen to act in this way."