Student loans have been a recurring topic of conversation recently, as the true cost of university degrees to younger working people has become clear.
Graduates in their twenties and thirties are often paying thousands of pounds towards their loans without any chance of clearing them, because of the interest added.
They will only stop paying when the loans clear, 30 or 40 years after they graduate.
Despite this, some politicians have rushed to defend the system as “fair”.
Rachel Reeves, the Chancellor, is one who said this, having agreed to freeze the threshold at which graduates start to repay their loans again from next year.
She argued in a recent radio interview with BBC Newsnight that non-graduates should not have to pay for the degrees of those who do, adding: “The truth is that to be able to bring down NHS waiting lists — and NHS waiting lists fell I think by about their greatest amount in 15 years last month — does require putting money in.”
Other ministers have likened the loan repayment to a so-called graduate tax.
Housing minister Steve Reed admitted the payments had “features of a graduate tax” in another radio interview.
So if the repayments on the loan are indeed a tax, and are there to help fund our NHS and other services – like tax is – then why are younger graduates the only ones paying it?
Knowledge and outrage over student loans has massively increased since tuition fees were trebled to £9,000 a year in 2012.
Before then, tuition was far cheaper and pre-1998 it was entirely free, meaning if graduates had loans at all, they were small and able to be paid off quickly.
That means there are several years’ worth of graduates in their fifties and sixties who benefited from a university education but paid nothing at all.
You could have two graduates, one in their late twenties and one aged 60.
Let’s say they both earn £50,000. One – the 60-year-old – pays basic-rate income tax of 20 per cent and national insurance at 8 per cent. The younger graduate pays both these, plus an extra 9 per cent effective tax on each extra pound earned.
This is in addition to the other economic difficulties they face – challenges getting on the property ladder being a key one.
If it’s unfair to make those who did not go to university pay for those that did, why aren’t we making those older graduates pay some form of graduate tax?
Some would argue that we can’t introduce extra charges retrospectively, but this is exactly what the Government is doing for younger loan borrowers, with ministers insisting this is “fair”.
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When the “Plan 2” set of loans were launched in 2012 alongside the tuition fee increase, the earnings threshold at which graduates would have to start repaying the loans was set at £21,000, with the government promising this would increase “annually in line with earnings from April 2016”.
But this promise has not been followed. Though there have been some increases to the repayment thresholds on an ad-hoc basis, including moving the £21,000 threshold to £25,000 in 2018, successive governments have frozen it on multiple occasions since 2016.
An investigation from The i Paper last week found graduates who went to university in 2012 will pay £14,000 more than they thought they would when they started their studies, as a result of retrospective rule changes.
If it’s OK to change the rules retrospectively for them, it should be OK to do so for older graduates too.
Students at university at the moment pay 9 per cent of their income over £25,000 towards their loans.
Maybe we could implement the same policy for older university-leavers, and see how they like it.
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