Government abandons initial plans to fine students for early loan repayments

Wills Robinson discusses the Government’s proposals to allow students to repay loans early without fines
NUS President Liam Burns has suggest that the Government need to be more clear on student finance issues. Photography: NUS Scotland (Flickr)

The Government is set to announce the scrapping of plans to impose the early payment of university loans by students next week. This move could now benefit the wealthiest members of society.

Ministers were considering imposing an annual charge of 5% on payments above a certain threshold, in order to avoid wealthier parents evading interest charges. Under the proposed penalty, someone repaying £40,000 could have faced a penalty of £2,000.

Under the current scheme, early repayments are allowed and are not affected by financial penalties.

Although the plans were described by the Government as “progressive”, they have since been retracted over fears that students might ultimately miss out.

The scheme, originally put forward by the Lib Dems, was scrapped in a deal which saw David Cameron back down from Business Secretary Vince Cable’s choice of Professor Les Ebdon to head the Office for Fair Access, amidst fierce Conservative opposition. Ebdon, in his new role, will be responsible for making sure students are not deterred from going to university by the higher tuition fees.

As of September, students can take out loans to pay annual tuition fees of up to £9,000, which will also cover their living costs.

They will then begin to repay the debt once they are earning more than £21,000 a year, with any outstanding balance being written off after 30 years.

Sally Hunt, general secretary of the University and College Union criticised the abandonment of the plans, saying: “Government should be prioritising how to make it easier for poorer families to afford university rather than focusing on yet another policy designed to make life easier for the wealthiest in our society.

“Today’s move exposes once again that we really are not all in this together.”

NUS president Liam Burns, suggested that government ministers should be more clear on student finance to avoid low and middle income families using their outstanding debt to help fund their degrees, “when it rarely makes financial sense to do so, particularly for those who are seeking to get on the housing ladder or start a family.”

When rumours of the proposals came out, they were branded as ‘crazy’ by the think tank CentreForum, suggesting that it would be ineffective and costly.

They also suggested that the costs outweighed the potential financial benefits, and that it was those who wanted to avert debt who repaid early, rather than the wealthy.

Despite much Conservative opposition over the appointment of Ebdon, others have argued that he is a suitable choice. During his 44 years in higher education, he has developed an impressive record in improving access among lower socio-economic groups, from neighbourhoods with low rates of participation. During his tenure as Vice-Chancellor of the University of Bedfordshire, he improved the institution as an opportunity university which does not close its doors to those with the potential to succeed. This included increased access from ethnic minority groups.

Ebdon last week introduced the idea of a ‘nuclear option’ against universities if they failed to take in enough people from poorer backgrounds.

However, there is optimism for students as well in that he is publicly against the new tuition fees and supports what he controversially calls ‘Micky Mouse’ degrees.

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