Students could face tougher loan repayments

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University graduates may be faced with tougher rules about repayments, due to the uncertainty which surrounds their long-term repayment, which carries the risk of unpaid debts causing a financial crisis.

This claim is according to the Higher Education Policy Institute (HEPI), who published a report which stated that ministers need to take action and either freeze the threshold which activates loan repayments being made, or lower it.

Currently, once a graduate earns at least £21,000 a year, a percentage of their earnings is deducted as repayment for their student loans. Also, the debt is cleared off after 30 years, irrelevant of how much remains to be repaid. This currently means that if a graduate never earns £21,000 or more, they will not repay any of their student loan. Figures indicate that for every £1 taken out in loans, only 55p is repaid.

In 2012, the maximum fee that could be charged for university tuition was increased to £9,000. Although this was a significant rise, students can at least take some comfort in the knowledge that fees are highly unlikely to rise again.

However, there is a likelihood that changes will be made to the repayment rules, which will undoubtedly be very controversial. Mr McGettigan, the author of the HEPI’s report, said that the most likely action to be taken would be that the threshold is frozen at £21,000.

He said: “A reconsideration of the terms and conditions of student loans is likely. The interest rate, repayment rate, repayment threshold and write-off period could be amended. Such changes can be made without new primary legislation.”

The government has the power to alter the terms of student loan repayments, and changes may be necessary in order for the government to balance its books.

Toni Pearce, president of the National Union of Students, said: “This report yet again highlights the utter shambles which was the last government’s trebling of tuition fees. It would be outrageous to now suggest that students should now be forced to pay for this through any change to the student loan terms and conditions, and students and their families simply would not stand for it.”