Money expert Martin Lewis is warning people starting university in these years that you will ‘pay a lot more’ after a change to the student loans system.
From 2023 onwards, anyone going to university is set to pay much more than graduates who finished their studies in previous years thanks to a change in the way the repayments work.
For the latest intake of students, they will have 40 years to repay their loan before the debt is wiped, which is an increase from 25 originally for Plan 1, and then 30 for Plan 2 loans.
Martin explained that student loans aren’t really ‘loans’ at all, but more of a graduate tax and that the vast majority of people won’t ever pay them off before they are wiped.
But a change to the repayment term means that people who started university in or after 2023 face paying their student loan ‘tax’ for much longer, while also facing a lower threshold before they have to start repaying, meaning ultimately more people will be paying more money for longer.
Martin said: “Because of all this framing about debt and going on about debt rather than saying this is quite an expensive additional tax, the government have dropped the repayment threshold, which is a bit like fiscal drag.
“Which means students on the new loans, who started in 2023 are going to repay a lot more because they are going to repay for 40 years.
“And they’ve got away with that without anyone screaming and instead they were screaming about £100,000 of debt which is irrelevant for the vast majority of people who have it.”
Martin then called for the student loan system to be completely renamed. He said; “First of all you would call the name a Graduate Contribution System. You would completely rename it. The biggest problem in student finance is that their loans are too small. Students in England have had low inflation rises which is pricing out those people especially from non university backgrounds which is a real threat to social inequality. The whole way we frame this discussion is wrong, we are student loan illiterate, it’s misnamed, misframed, misunderstood and we need to be very careful.”
