Student loans repayment threshold discussed in Parliament – but petition could spark bigger debate

Yesterday's debate was secured by Labour MP for Walsall South Valerie Vaz, who took Universities and Science Minister Jo Johnson to task on the Government's decision to ignore 84% of consultation responses that were against freezing the threshold at which students repay their loans.

Because the Government has frozen the threshold at which first-time undergraduates in England who have started university since September 2012 repay their loans, many of these students will pay back more.

For example, if you earn £23,000 and the threshold had increased to £23,000, you'd have repaid nothing, but as it's stuck at £21,000, you repay £180 a year.

Former Universities Minister David Willetts initially proposed in 2010 that the student loan repayment threshold increase to £21,000, and after that increase periodically to reflect earnings. Another ex-minister – Vince Cable – then promised this uprating would happen every year.

However, the Government has since gone back on its promise and frozen the repayment threshold at £21,000 until April 2021.

Martin Lewis, founder of MoneySavingExpert.com and former head of the Independent Taskforce on Student Finance Information, has been fiercely campaigning on this issue since the consultation on freezing the threshold first opened last July – meeting ministers, organising letter-writing and even hiring lawyers to investigate a legal challenge.

What happened during yesterday's debate?

While the debate was low key, it did allow Vaz to outline concerns regarding the fairness of the student loans repayment situation.

She questioned why the Government went against popular opinion in freezing the threshold and added that "the Government's own figures on the repayments show the inequity of this".

Vaz said: "The new scheme is far from progressive, as some ministers claimed. Graduates earning £21,000 to £30,000 will have to pay £6,100 more, those earning over £40,000 will pay only £400 extra, and those on £50,000 will pay only £200."

Vaz also said that young people entering university can't understand what they're signing up to and that student loans should be regulated like other loans.

She added: "Student loans are not subject to financial regulations and consumer protections, as is the case with other loan agreements. That must change, and I say to the minister that there is an opportunity in the Higher Education and Research Bill to add that extra regulatory protection."

Responding to Vaz, Universities Minister Johnson said the changes will mean that graduates earning over £21,000 will repay about £6 per week more than if the Government had increased the threshold in line with average earnings.

The Petitions Committee will decide today whether there will be a further debate on freezing the repayment threshold

Repeating the Government's previous explanation for its change of heart on the threshold, Johnson added: "The critical thing is that we have put our higher education finance system on a sustainable footing. In order to do that, we had to take some difficult decisions.

"Freezing the repayment threshold was certainly one of them, but it was rooted in an underlying fairness, which is that graduates, who will go on in their lifetimes to earn significantly more than non-graduates, have to make a contribution towards the cost of running a big, expanding and successful higher education system."

Johnson also argued that students are provided with clear information before being granted a loan and that Student Loans Company information is regularly reviewed.

I signed a petition on this issue recently – what's going on with that?

The 'Stop retrospective changes to the student loans agreement' petition, which quotes MSE, has so far received more than 130,000 signatures – meaning it must be considered for a parliamentary debate.

The final decision on whether or not the petition is debated in the Commons rests with the Petitions Committee (which presides over petitions that reach 100,000 signatures). We understand the committee will decide whether to hold a debate when it meets today.

If it's decided that a further debate should take place following the committee's decision, it would likely be higher profile and more in-depth than yesterday's discussion.

Keep an eye out for further coverage on this later today or tomorrow.