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Freezing the student loan repayment threshold

Published Friday, July 15, 2016

In September 2012 the Government made significant changes to the student finance system: tuition fees for full-time undergraduate degrees were raised to £9,000 per year, the loan repayment threshold was raised to £21,000 and a new tiered rate of interest was introduced for student loans. In 2015 the Government issued a consultation on freezing the loan repayment threshold for five years. In November 2015 the Government announced in the Spending Review that it had decided to freeze the repayment threshold for all post-2012 loans until at least April 2021.

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October announcement on student finance 

On 1 October 2017 the Prime Minister announced that there would be changes to the student finance system:

  • the fee cap would be frozen at £9,250
  • the repayment threshold would rise to £25,000
  • there would be a review of student finance

These changes are not reflected in the contents of this paper. They are looked at in the briefing Prime Minister's announcement on changes to student funding

 

In December 2010 the Browne Review of higher education recommended making changes to the higher education funding system including removing the cap on tuition fees and raising the repayment threshold for student loans to £21,000. In response to the Browne Review in September 2012 the Government made significant changes to the student finance system: tuition fees for full-time undergraduate degrees were raised to £9,000 per year, the loan repayment threshold was raised to £21,000 and a new tiered rate of interest was introduced for student loans.

David Willetts the Minister for Universities and Science in the 2010 coalition Government introduced these changes in a statement on 3 December 2010; in this statement he said that the loan repayment threshold would be ‘increased periodically to reflect earnings’.

In 2015 the Government issued a consultation on freezing the loan repayment threshold for five years. This was deemed to be necessary to keep higher education on a sustainable footing as the proportion of borrowers liable to repay when the £21,000 threshold came into effect in April 2016 was lower than was expected when the policy was initially introduced. The consultation stated that the Government’s preferred option was to freeze the threshold for all post 2102 loans.

Around 84% of respondents to the consultation were against freezing the repayment threshold for all post 2012 borrowers.

However in November 2015 the Government announced in the Spending Review that it had decided to freeze the repayment threshold for all post-2012 loans until at least April 2021.

Government analysis suggests that the largest increase in lifetime repayments in absolute terms will be among higher earners and the largest increase as a proportion of earnings will be among lower earners. The average increase in repayments is also expected to be greater among women than men. The evidence for disabled graduates and those from a minority ethnic group is less robust, but suggests that both groups will face larger absolute increases in repayments.

 

 

Commons Briefing papers CBP-7653

Authors: Susan Hubble; Paul Bolton

Topics: Higher education, Students

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