Increasing the amount graduates in England pay back on their student loans could save the government nearly £ 4bn each year and prevent universities from seeing their revenues cut, according to a report by the architect of the current funding system students.

Nick Hillman, who was special adviser to the universities minister in 2012 when tuition fees in England were raised to £ 9,000, said reducing the income levels at which students repaid their loans was the fairest way and most effective way to maintain funded higher education at current levels. .

Using modeling done for the Higher Education Policy Institute (Hepi), Hillman found that lowering the graduate reimbursement threshold from £ 26,000 to £ 19,000 would result in higher contributions for many more graduates. during the 30 years before their loans were written off.

The proposal comes as the Treasury is examining how to lower the cost of England’s student loan system, with outstanding loans reaching £ 140 billion last year. Among the changes mentioned is the reduction of annual tuition fees to £ 7,500, which many vice-chancellors say would lead to serious funding difficulties.

Hillman said other alternatives designed to save the government money – such as reducing the number of students or spending less on each student – were less effective and likely to be less acceptable on the plan. Politics.

“Cutting places at a time of growing demand is particularly unwise, as is giving institutions less for education when their finances are already so tight,” Hillman said.

“Our modeling shows some of the changes to the loans that could be made instead. For example, it is possible to reduce depreciation costs by reducing the repayment threshold or by extending the repayment period. Such adjustments may not be popular, but they could save money if politicians are determined to find them.

“Reducing the repayment threshold to less than £ 20,000 increases so much that it could even allow new initiatives, such as the return of maintenance grants, while saving money.”

Under the current system, graduates repay 9% of their income on the first £ 26,575. Interest is charged on the unpaid amount, but the remaining total, including interest, is written off by the government 30 years after graduation.

Hepi commissioned modeling from consultancy London Economics, which estimated that, without any changes, the direct cost to the government of the 2020-21 cohort of undergraduates was over £ 9bn in loans amortized for tuition and maintenance costs.

London Economics calculated that the average student debt at exit would be £ 47,000, of which 54% would be written off after 30 years. Less than one in eight students would repay their loans in full, while one in three would not repay a penny.

Reducing the threshold to £ 19,300 – the same as before 2012 – would mean the write-off would rise from £ 9bn to over £ 5bn, while the proportion of students repaying all their loans would double. However, average reimbursement rates would increase by £ 10,000.

The modeling revealed that the other proposals were much less effective. Reducing the interest rate charged to that of inflation – a popular proposition for many years – would actually increase write-offs, as high-income graduates would make lower total repayments. Extending the repayment window from 30 to 35 would make little difference.

Jo Grady, secretary general of the University and College Union, said the proposed changes were regressive, with the greatest impact on lower incomes.

“Ministers and think tank members would do well to remember that even low-income graduates already spend most of their 30s and 40s paying effective tax rates of over 40%. Reducing the threshold well below the average worker’s salary would also make it a reality for many fresh out of college graduates, making it difficult for them to plan and save for the future, ”Grady said.

Hillman said: “Different changes have different impacts on different groups and we urge policy makers who want to save money by modifying student loans to use wisely the next few months to ensure that the impact is as fair as possible.”