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Student loans should be renamed ‘graduate contribution’ tax, universities minister suggests

S tudent loans should be renamed “graduate contribution” tax, the universities minister Jo Johnson has suggested.

Addressing a Tory party conference fringe event, Mr Johnson said that the Government needs to work on the language around student loans, so that young people do not feel as though they are getting a bad deal.

He said that he is “in agreement” with Martin Lewis, the founder of MoneySavingExpert.com, who has long campaigned for the re-naming of student loans.

Mr Johnson told the event: “I think [Martin Lewis is] absolutely right, this should be seen best as a graduate contribution.

“It is clearly a time-limited graduate contribution, because it only lasts 30 years and it’s also an income-link time-limited graduate contribution.

“So I think we do need to work on the language and cease to use the terminology of debt and loans, and it has to be understood as a time-limited and income-link graduate contribution that people are making.

M r Lewis told the fringe event that the language of debt is “psychologically damaging” and misleading .

He added: “For over 20 years we have educated our youth into what we call a debt, and we have never educated them about debt properly.

My big ask, if you want to fix this, if you want to stick with this system? Get rid of the name of debt. This in every other country is called a graduate contribution system.

Ahead of the conference, Prime Minister Theresa May announced that the repayment threshold for student loans will be raised to £25,000.

She announced a freeze on tuition fees at £9,250 a year and a rise in the level of earnings at which student loans begin to be paid back, saving almost a million graduates £360 a year.

T he announcements were designed to appeal to younger voters who voted for Jeremy Corbyn at the last election.

On Tuesday the Institute of Fiscal Studies (IFS) said that the decision to increase the threshold for repaying student loans is a big and expensive giveaway to graduates which will raise the cost of higher education to the taxpayer by 40% over the long run.

In a new analysis, the think-tank found that raising the repayment threshold from £21,000 to £25,000 will save some graduates up to £15,700 over a lifetime, but will add £2.3 billion to the annual cost of the sector to the taxpayer over the long term.

The freeze on tuition fees in England will have a much smaller impact in the short term, but will be unsustainable in the long term, the report warned.

Freezing fees at £9,250 will reduce the debt of students coming into the system by just £800 and will save the Government £300 million, it added.


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