UK Chancellor Sunak calls for extra billions to be clawed back in student loan repayments
British Chancellor Rishi Sunak’s spring statement contained sweeping attacks on working-class university graduates.
The annual income threshold after which student loans must begin to be repaid will be lowered from £27,295 to £25,000. Loans will now only be canceled after 40 years instead of 30. The decision to tie loan interest to the rate of RPI inflation, rather than RPI + 3%, is actually a gift to top-earning graduates .
The changes will hit working-class young people the hardest, with the Institute for Fiscal Studies (IFS) estimating that those on low and middle incomes will have to pay around £30,000 extra over the life of the loan.
Previously, the reimbursement threshold increased according to average income. Now the government has frozen the threshold at £25,000 for the next five years, which means – under conditions where inflation is set to hit record highs – graduates will have to spend more and more of their earnings on paying back their loans.
The threshold is expected to start rising again from the 2027-2028 school year, but it will be indexed to RPI, rather than average earnings, which means that future graduates will repay a greater share of their student loans. they manage to make gains in their salaries.
Currently, only 25% of graduates repay their loans in full. The combination of the extended repayment period and the lowered threshold will bring that figure to 70%, according to the IFS. According to their calculations, Sunak’s changes will save £6bn in 2023 and £2.3bn each year thereafter.
Although capping the maximum interest rate at RPI, rather than RPI + 3%, reduces the amount payable, this has a very small impact for most graduates, dwarfed by the other changes. Those who will benefit are the best-paid graduates, little affected by the lowering of the income threshold and the extension of the repayment period. Graduates at the top of the income scale are expected to pay up to £20,000 less under the new reform, according to the IFS.
Students who have enrolled in universities since 2012 (the last time the loan system was reformed) have the worst of both worlds. They are affected by changes in repayment thresholds from 2023, but they will not see the benefit of lower interest rates. The IFS estimates that middle-income graduates in this cohort will pay £20,000 more during their loans. Given current inflation rates, interest on student tuition loans in this group is expected to climb to 12% next September.
Martin Lewis, who runs the financial advice website Money Saving Expert, said ‘Sunak’s plans will see most university graduates paying significantly more for their degrees in their lifetime than they do now. It effectively completes the transformation of student “loans”, for the most part, into a tax on graduates throughout working life.
“The decision to extend repayments to age 40, combined with the other measures, will leave most of those starting college straight out of school paying it back into their 60s.”
Sunak has taken another step in the long-prepared commodification of higher education – further turning higher education into a privilege only for the wealthy – beginning with the introduction and initial tripling of tuition fees by Tony Blair and David Cameron’s second tripling of the cost of college. education at £9,000 a year. This was done under a system that initially left the government with the burden of billions of pounds of unpaid loans. the FinancialTimes reports: “The government has estimated that 54% of student loans will never be repaid, with the present value of outstanding debt standing at £161billion.
But the ruling elite never intended to cover that cost and have been working ever since to shift the burden more onto students.
An impetus has been given by the government’s desire to recoup the hundreds of billions spent by the government in the first two years of the pandemic, most of it in the form of bailouts for big business. Sunak offered a meager one-off 5p per liter fuel tax cut and a 1% reduction in the basic rate of income tax from 2024 as the only concessions in his blunt spring statement. The money to fund these tax cuts comes almost exclusively from increasing the burden on poorer graduates with the new student loan reform.
The student loan announcements are also an effective cut to higher education, with annual fees capped at £9,250 and no additional government money being made available. The fully realized market system aims to simultaneously reduce the number of students and the range of higher education provision.
Given that most university funding comes from student tuition and inflation is rising and is expected to rise further, the cap will put many institutions in a precarious financial position, leading to the abandonment of “unprofitable” courses. and further cuts in staff salaries and conditions. the FinancialTimesquoted Universities UK which “calculated that at the end of the 2024 academic year, inflation would reduce the value of annual tuition fees to £6,600 based on 2012 prices, when the fee cap tripled to reach £9,000”.
According to the Organization for Economic Co-operation and Development (OECD), the UK already has the lowest share of public funding for higher education among member countries, at 25%, compared to an OECD average of about two-thirds. As the government pushes ahead with its plans, working-class youth will be kicked out of fewer courses and places, if they can even afford to consider going to the university.
Education unions have no fundamental opposition to any of the measures described by Sunak.
National Union of Students (NUS) President Larissa Kennedy said the spring statement was a “shame” because “students are paying hundreds of extra pounds in energy bills, relying on food banks through soaring inflation and are forced to choose between heating and eating.” But this bluster belies the NUS record.
No call has been made for a fight back against the government, nor any opposition raised against the whole student loan scheme, long accepted by NUS and education unions. These organizations offered only token resistance to Labor’s introduction and tripling of tuition fees. They have demobilized major protests against their new tripling to £9,000 a year and cuts to grants like the Education Retention Allowance. Today, they make no call for the right to universal and free higher education.
This is the case even as attacks on students intensify, people from working-class backgrounds are increasingly deprived of access to higher education, and at a time when university staff are fighting against an unprecedented drop in their pensions and the gutting of their pay, terms and conditions. The NUS and the Union of Universities and Colleges (UCU) have not mounted a systematic campaign against the commodification of higher education that underlies the attacks faced by students and workers in higher education.
The International Youth and Students for Social Equality (IYSSE) demands an end to school fees, defeating the government-led commodification and privatization of the entire education system. This fight is necessarily linked to the unified struggle of working class and student youth for socialism and the provision of quality education for all as a social right.