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Student loan proposals would impact women and poor most

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
24/09/2015

George Osborne’s budget proposal to freeze the student loan repayment threshold will cost the typical borrower an extra £2,800, disproportionately affecting women and the poor, according to Sutton Trust research.

The findings come from ‘Unfair Deal’, a report authored by higher education consultant John Thompson in conjunction with the charity. The report analyses the implications of the 2015 Summer Budget for students.

A number of significant changes to higher education funding were proposed in the Budget, including replacing maintenance grants with loans and freezing the level at which graduates start to repay their loans at £21,000 for five years from 2016.

The charity notes these proposals would significantly increase the average cost of higher education, particularly for students from low income backgrounds who are currently eligible for maintenance grants.

While overall average repayments would be £2,800, men would pay an average of £2,300, women £3,300. The charity attribute this to women’s earnings tending to be lower, and the greater likelihood they will remain so across the 30 year repayment period.

The report also notes this change in loan terms will significantly increase the average cost of higher education for students from low income backgrounds, currently eligible for maintenance grants. The average debt for this group will increase to over £50,000 when means tested maintenance grants are converted to loans, and the change in loan terms would result in increased repayments, particularly for those who do not secure higher paid jobs.

The terms and conditions for taking out a student loan currently include a clause that may allow repayment conditions to be changed retrospectively. The Sutton Trust is concerned that by agreeing to this condition, students effectively sign their name to a blank cheque.

As a result of the findings, the charity is recommending loan terms for current borrowers should not be changed, new borrowers be given definite terms guaranteed to apply for the whole repayment period, and the longer term risks of student loans should be borne by government, not individual students.

The report’s release follows new research from the Institute of Fiscal Studies suggesting women with degrees earn three times as much as those without one.

“If government establishes a precedent for student loan terms changing retrospectively to the disadvantage of borrowers, then in future anything goes,” said John Thompson.

“The advice students have received will turn out to have been based on a false premise, and in future no firm reassurances could be given. There will then be a serious risk in future students’ decisions as to whether, what, where and how to study will be distorted by their concerns about taking out loans, undermining efforts to ensure higher education is a driver of social mobility.”

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