Martin Lewis Says Student Loan Changes Will Hit Lowest Earning Graduates Hardest | TOTUM
Ben HaywardSeptember 27th

Martin Lewis has warned that the government’s proposed changes to student loan repayments could see costs rise by £400 per year - with lowest earners the hardest hit. 

The Financial Times reported that ministers are considering cutting the threshold at which graduates start repaying loans, causing outcry among students, unions and finance experts alike. 

Under the current system, graduates on a Plan 2 loan repay 9% of earnings above the current threshold of £27,295 until they either clear the borrowing, plus interest, or for a period of 30 years - whichever comes first.


However, the Government is said to be considering proposals to drop the repayment threshold to £23,000, meaning the changes would hit those on lower salaries.

In response, the MoneySavingExpert founder has warned this could result in spiralling costs of loan repayments by as much as £400 per year for some graduates.

Speaking in this latest MSE video, Lewis said: “This sounds like a trivial difference - it isn’t. It would make a huge impact to increasing the costs of going to university.

“The numbers show 83% of those who are leaving university are unlikely to repay in full before the 30 years, which means for the vast majority of those who go to university, the student loan system doesn’t work like a loan.

“It works more like an additional tax of 9% for 30 years on all earnings above the threshold.

“That’s why, by lowering the threshold - a bit like lowering the point in which you start repaying tax - the majority of people would have to pay a lot more.”

The potential move has been floated by government with the aim of raising billions of pounds extra for the public purse, although ministers are yet to confirm if any changes will in fact be made.

Dropping the repayment threshold is just one of the measures suggested by the Augar review of higher education in 2019, with others including cutting tuition fees from £9,250 to £7,500 and extending the repayment period from 30 to 40 years.


Hillary Gyebi-Ababio, the NUS vice-president for higher education, said: “We would be totally opposed to any plans on reducing the salary repayment threshold for student loans.

“Like the government’s decision to increase national insurance contributions, this burden targets people earning lower incomes. After 18 months of such hardship, and with the looming hike in energy prices set to hit millions of the most vulnerable this winter, the injustice is simply astounding.”

Commenting on the FT report, a Department for Education spokesperson said: “We continue to consider the recommendations made by the Augar panel carefully alongside driving up quality of standards and educational excellence and ensuring a sustainable and flexible student finance system.

“The student loan system is designed to ensure all those with the talent and desire to attend higher education are able to do so, whilst ensuring that the cost of higher education is fairly distributed between graduates and the taxpayer.”

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