Higher student loan threshold “an expensive giveaway”
Increasing the income threshold that triggers repayments on student loans will hike costs to taxpayers by 40 percent each year.
Increasing the income threshold that triggers repayments on student loans will hike costs to taxpayers by 40 percent each year, a study has claimed.
On October 1, Prime Minister Theresa May announced the income threshold for post graduates would be increased from £21,000 to £25,000 for all those who started university after 2012.
The Institute for Fiscal Studies said this higher repayment threshold is a big and expensive giveaway to graduates – saving middle earning graduates up to £15,700 over their lifetimes.
The institute claimed that a shift in policy will also represent a £2.3bn yearly increase of costs to taxpayers for providing higher education.
Research from the institute found that 83 percent of graduates will not have fully repaid their loans by the time the loans are written off – 30 years after graduation.
Separately, the Student Loans Company is promoting its Prevent Over-Repayment Scheme which encourages borrowers to switch from the PAYE system for repayments onto direct debits, to ensure payments stop automatically when their loan is paid off.
The company is writing to every customer who is within 23 months of repaying their student loan and inviting them to opt to pay by direct debit instead.
The new arrangement applies to new customers and the 93,000 people who already use this method of payment to repay their student loans.