Penalty proposals on early repayment of Student Loans
Just as you thought it couldn’t get any worse with the increasing tuition fees due to start from next year (2012). A long comes an another almighty gasp moment as the coalition government mulls over plans to charge students who wish to pay off their Student Loans early to essentially make money from those higher earners after University.
If it does come into being, it’s likely to happen once the new Tuition Fee structure comes into force in 2012. Just like the current system, fees will initially be paid by the government, and then repaid by the student after graduation once they are earning more than £21,000 or more per year with any unpaid debt being written off after 30 years.
The coalition has always stressed that the system is fair since, higher earners generally pay back more than lower earners. The way it works is if you earn £21,000 or less the interest rate is calculated on inflation (RPI) with anyone earning £41,000 or more the interest rates would be calculated at RPI plus 3%.
However, where this has al come about is that the government is concerned that by allowing early repayment for students who could afford to pay off their Student Loans, it would enable higher earners, or those from wealthy backgrounds, to “unfairly buy themselves out of this progressive mechanism”. I can see the sense in that and I don’t have a problem with it personally.
So the government plan is therefore suggesting a system where a levy is charged on repayments over a certain level. However, this levy is only likely to affect a small number of graduates such as those on over £60,000 a year and is likely to cost around £1,000 or £3,000 a year.
If you’re at University or planning to go, I wouldn’t see this as a particularly bad thing. I’d be more than happy to be earning £60,000 a year and the thought of getting the Student Loan paid back sooner rather than later on that income wouldn’t be a bad thing.
So how does this affect everyone?
Well if you’re a Scottish home student, you have nothing to worry about since you do not have to pay tuition fees and as a consequence, there’s no changes are planned to the repayment system for you.
If you’re a Student in Northern Ireland, The Northern Ireland government has already said fees will not rise for the next four years, so you’ll no doubt find it far easier to pay off your Student Loans either way.
Moving onto Welsh Students, the Welsh Assembly has already announced that fees will rise to up to £9,000, in line with the tuition feed rises in England, but however, unlike English Students the government will meet the extra costs for you if you choose to study at any UK university.
So last of all, the English Students! Erm… not much to say really, Tuition Fees going up, you’re expected to meet the cost of those yourself with your Student Loans and that’s pretty much all there is to say on that. Unless you can somehow change nationality without being found out. There isn’t a great deal to be positive about…
