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Tuition fee changes ‘to save students £15,700’

Oct 3, 2017 by

Raising the earnings threshold for repaying tuition fees in England could save individual students up to £15,700 over their working lives, says the Institute for Fiscal Studies.

The financial think tank has analysed the impact of changes to repayments announced by Prime Minister Theresa May at the weekend.

Students will pay back when they earn £25,000 per year, rather than £21,000.

The IFS says this change will cost the Treasury £2.3bn per year.

At the Conservative party conference, Mrs May announced changes to the student finance system, widely seen as an attempt to attract young voters.

These included cancelling an increase which would have taken fees above £9,500.

The IFS says this cap on fees will save students about £800 – and reduce costs to the government by about £0.3bn.

Lower costs

Although the IFS warns that freezing fees indefinitely is “unsustainable” as it would leave universities without adequate funding.

But the think tank says that raising the point at which repayments are made will have much bigger savings for students and much bigger costs for the government.

For a typical graduate, it would mean graduates pay back £15,700 less over 30 years, before any unpaid loans are written off.

This will also mean that 83% of graduates will not pay back all their debts, raising the long-term costs by 41% for the government.

According to the IFS, it would mean that 45% of the value of loans to students would not be recovered.

Chris Belfield, research economist at IFS and author of the analysis, said altering the repayment threshold is a “seemingly small change” but it would save students up to £15,700 “at a considerable cost to the taxpayer”.


Reality Check analysis

Student loans are a tricky area for the government because what the IFS describes as “a big and expensive give-away to graduates” does not necessarily sound impressive.

Theresa May’s announcement on Sunday that the change in the threshold would be worth £30 a month is correct for 2018.

If you’re a graduate earning more than £25,000 a year, there is a £4,000 chunk of your income which will no longer be eligible for the 9% loan repayment – that’s £360 a year or £30 a month saved.

But on top of that, the threshold which was due to be frozen, is instead going to rise in line with earnings.

Take the extra savings every month for the 30 years over which loans need to be repaid and you get to the IFS figure of a £15,700 lifetime saving.

The government said these changes to the student loan regime would cost an extra £1.2bn between 2018-19 and 2021-22, but it’s only later that the costs really start to mount up.

Each new cohort of students entering higher education each year will cost the government an extra £2.3bn, according to the IFS.

More changes may be on the way – the government says it’s looking at the the entire student finance system over the coming months.

Source: Tuition fee changes ‘to save students £15,700’ – BBC News

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