Rachel Reeves is breaking the student loan contract and making graduates pay for it
We need to see this Government show its commitment to the young people who have invested in their own futures, writes Alex Stanley
There are not many contracts you sign at 17 or 18 years old that impact your bank balance until your early 50s.
Listen to this article
Maybe a student loan is unique in that way? It is almost unique in another way – the terms can change at the whim of politicians.
Yesterday, in response to growing pressure from graduates led by Rethink Repayment and to vocal opposition from me and student leaders at the National Union of Students, the Chancellor defended it, saying it was a “fair system”.
Her decision in the Autumn budget to freeze the loan repayment threshold – effectively adding hundreds of pounds to the amount we pay back each year – was a political calculation. We went to university, signed a complex contractual agreement with the Student Loans Company, and now that loan is a political football impacting our bank balances each month.
At a time in our lives when we should be setting up our futures, we are feeling the fiscal drag and living paycheque to paycheque. The burden of student loan repayment hits the average grad hardest in their thirties – at exactly the time we’re looking to try and settle down, get on the property ladder and maybe start a family. We need to see this Government show their commitment to the young people who have invested in their own futures, and raising the repayment thresholds is a good place to start. These graduates are our teachers, nurses, architects and actors – their education isn’t just a personal return, it benefits society too.
I, like the millions of others who went to university between 2012-2022, or continue to do so in Wales, am on a Plan 2 loan. This means we pay back 9 per cent of our income each month, over £28,470. In the Autumn Budget, the Chancellor announced that she would freeze this threshold between 2027 and 2030. If wages increase with inflation, this means that graduates earning just above the minimum wage will be repaying their student loans, leaving them with next to no financial breathing space post-university.
When we signed our loan agreements, we were told it wasn’t like a usual loan, it wouldn’t impact our chances of getting a mortgage, or show up on our credit files, and that the graduate premium – the amount a graduate can expect to earn more than someone who didn’t go to university – would mean it was still worth it. There is something very concrete impacting our credit files and ability to save: the amount of money left in our pockets after our monthly loan payments are made.
Some people will tell you that the student loan is a graduate tax, and it’s only fair to repay once you start earning. But the wealthiest families simply opt out of the system, when under a progressive tax, they should pay more. Those whose families can afford to pay the fees upfront don’t have 9 per cent docked from their paycheque each month. This means that the debt graduates accumulate acts as an easy-to-pay bill for the wealthiest, but a constant, ever-increasing burden for the rest of us.
Don’t get me wrong, I am still very glad I went to university. I certainly wouldn’t be in the role I am now without it. The skills I developed, the connections I made and the lectures that stuck with me mean I recommend it to anyone. But I do still wince each time I see my payments rise, and my debts rise with them.
As the Chancellor said yesterday, about half of young people go to university. And with 500,000 young people going to university each year, we will only represent a larger share of the electorate at each election. By changing the terms we thought we agreed to, the Chancellor has made this a political issue.
The Chancellor needs to deliver for graduates. A commitment to increase the repayment threshold each year would be a good first step to show that she understands the investment we made in our future and in society through university, and that this Government is willing to uphold the terms of the agreement we thought we signed.
____________________
Alex Stanley is Vice President, Higher Education at the National Union of Students.
LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.
The views expressed are those of the authors and do not necessarily reflect the official LBC position.
To contact us email opinion@lbc.co.uk