Narrow defeat in Parliament for bid to block retrospective student loan hikes

The Higher Education and Research Bill, which went through its second reading in the Lords in December, is designed to make it easier for new higher education providers to start up and call themselves universities.

However MoneySavingExpert.com founder Martin Lewis has spearheaded a campaign to make changes to the bill in order to protect graduates from future retrospective hikes.

The campaign follows a Government U-turn on a promise to increase the threshold at which first-time undergraduates in England who started university in September 2012 and beyond repay student loans. Because the Government has now gone back on its word and frozen the threshold, many students will pay back more (see a full explanation below).

The amendment voted on last night sought to strip ministers of the power to make adverse changes to the terms of a student loan once it's been taken out.

Last night, Lord Watson of Invergowrie put forward the amendment, and despite being asked by the Government to withdraw it, forced a vote. However unfortunately it was narrowly defeated, by 248 votes to 235.

A third reading of the bill is scheduled to take place in the Lords, but now the amendment's been voted on it's almost impossible for it to be resurrected.

What's this all about?

The Parliamentary amendment followed a Government U-turn on a promise to increase the threshold at which first-time undergraduates in England who started university in September 2012 and beyond repay student loans.

Because the Government has now gone back on its word and frozen the threshold, many students will pay back more,

Here are six things you should 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 thethreshold 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.