Sunak doubles student fee loans to pay for Spring Statement promises
There are few commentators that either agrees or commends Rishi Sunak’s Spring Statement as worthy of the impending cost of living crisis heading towards one-quarter of all households in Britain. Student fee loans are going to take the brunt as the cost of servicing them will soon be doubled.
Indeed, there was much to say about just how cynical this entire statement was. The 5p tax taken off the pump price of diesel and petrol not only meant very little in real terms – but the average cut actually made by retailers was 2.7p – as they took the opportunity to pocket the rest by increasing prices – when the market price of fuel had not actually increased in the first place. Worse, in background documentation of Sunak’s statement – it looks rather more like he will increase the same tax by 8p per litre next year.
There were other tax manoeuvres that were interpreted as nothing more than political chicanery, but quite possibly the most cynical in all of this was to make university students pay for much of Sunak’s giveaways.
The cost of the chancellor’s spring statement is going to be paid primarily by one group of people: future students.
The Times reports that – changes to how graduates pay back their student loans will make the Treasury £35.2 billion over the next six years. A graduate who pays £47,000 in repayments today would pay around £100,000 under the new system. This is more than a 100 per cent increase in debt repayment by future students.
At the moment, students start repaying their debt once they earn £27,295, at a rate of 9 per cent of anything they earn above this threshold, and the debt is wiped after 30 years. But from next year, they will start repaying once they earn £25,000 and it will last 40 years – in other words, almost their whole working lives.
Around 66 per cent of graduates (about 1.5 million) currently take out student fee loans, UK student debt statistics confirm. When we turn the percentage into real numbers, the student loan number reaches a whopping £20 billion each year. The value of outstanding loans at the end of March 2021 reached £141 billion. The Government forecasts the value of outstanding loans to be around £560 billion (2019‑20 prices) by the middle of this century. The average debt among the cohort of borrowers who finished their courses in 2020 was just over £46,000.