Photo: Andrew Boyers / Reuters
There’s a recently resurfaced clip from 2006 of Boris Johnson explaining his theory for dealing with the media and general public. “I’ve got a brilliant new strategy,” he says, “which is to make so many gaffes that nobody knows which one to concentrate on.”You’ve got to had it to him: It’s working! Many of us were so absorbed with working out the rise in our energy bills or whether he was hosting a lockdown ABBA party that we didn’t even clock student loans are going to be costing us, on average, an extra £110 per year from April this year.
Every year, the government raises the payment threshold by 4.6 percent on student loans in line with a variety of factors, like the cost of living. This year, they’ve decided to not raise that threshold and freeze it instead.
Why did my student loan payment increase?
Nobody has to pay their student loan back until they earn over a specific amount. Right now, that’s £27,295. The government usually raises that threshold every year, so you continue to pay the same amount in repayments even as you progress in your career and earn more money. But because they’re not raising the threshold this time round, uni graduates will now have to fork out £3,000 more than expected over the course of their repayments.
How much is the repayment threshold?
The move affects people who are on a Plan 2 student loan, which is essentially anyone who started university in England, Wales or Northern Ireland from 2012 onwards. It also hits postgrad students in England and Wales who took out a loan for their Master’s or postdoc on or after the 1st of August, 2016 – the repayment threshold will be frozen at £21,000, meaning they’ll pay £87 more every year.
Does this affect me?
Not like this, but there’s been plenty of times where students have paid the price more than other parts of society, most notably when Nick Clegg got everyone to vote Lib Dems on the promise that he would phase out student loans entirely, only to form a coalition government with the Conservatives and triple them instead.
Has this happened before?
Well, the government is technically adjusting our loans all the time, says James Yelland, a communications and marketing manager from The Money Charity. “You think about fixed and variable interest rates on a savings account. Banks will, generally speaking, offer a lower fixed rate because they're stuck with that commitment,” he explains. “Whereas if you go for a variable rate, you’ll probably get a better deal, but the banks then have the freedom a little bit to play around with it. They've got a little bit more leeway, and in what they can do with your money.” Essentially, student loans are a variable rate loan, which means that you get a better deal overall but the government can make changes in line with a whole range of factors which they dictate.
How can the government just change the rules on our loans?
Alongside a looming hike in National Insurance, it’s another way that the government seems to be trying to recoup pandemic spending from lower income people whilst simultaneously offering tax breaks to the rich, “It's breaking a policy pledge that has been in place for ten years or so,” says Yelland on the threshold change. “This is obviously one of the measures where they decided they needed to claw back some additional money for the government.” Deeply frustrating.
Why is this particular change worse than other changes?
Unsurprisingly, the National Union of Students isn’t a fan. “The concept of a repayment threshold only exists because this government prefer marketising higher education rather than seeing it as a public good,” a spokesperson told VICE. “They should get their priorities right, stop viewing education as a product to be bought and sold for individual gain, and scrap tuition fees. Only then can we begin to build the student movement’s vision of a fully-funded, accessible, lifelong, and democratised higher education system.”
What do the students think?
In a post on a government blog called The Education Hub, which reads like someone trying mug you in the politest possible way, they’re doing this because “the cost of higher education to the taxpayer is rising, so the government wants to ensure the student loan system is underpinned by sustainable funding arrangements so it provides value for money for both those who benefit from higher education and the taxpayer”. It continues: “Median annual earnings for young graduates have risen from £24,500 to £28,000 over 2016-20, and in 2020 they typically earned £6,500 more per year than their non-graduate counterparts”. The use of pre-pandemic statistics feels particularly shady here, particularly because in the financial year ending ‘21, a third of all workers saw their household income fall and one in four were furloughed.
What does the government have to say about this?
Well, they technically haven’t changed the agreements of the loan. They just haven’t changed the threshold of when you have to pay it back in line with earnings, inflation and a whole bunch of other things like the cost of living. Sneaky shits.
How is the government just allowed to change our loans?
Despite the fact that the government have historically sold off chunks of the country’s student loan debts to individuals and corporations who want profit off the system, the majority of student loans are still owned by the government which means this threshold freeze will help pay off national debt, or go towards more ABBA parties… who knows?!
Who benefits from student loans?
Yelland says not to worry too much. “Obviously, if you'd averaged out across the year, that means that £10 less of your payment packet. But it's sort of one of those slightly kind of nebulous concepts of money that was never almost never there anyway,” he explains. Essentially, like National Insurance, which is taken directly from your wages, “you'll never actually see or have [the money] in your hands.” In short, you can’t default on your student loan repayments because they’re automatically deducted from your wages, but you might feel the squeeze in other parts of your budget as a result of that. In any case, student loans are wiped 30 years after your graduation date. Not long to go, eh?@rossy