News emerged this week that the government is scrapping the early repayment penalties they intended on implementing upon graduates who tried to repay their student loan earlier. The whole ‘Lib Dems wanted it but we the Tories saved you from it’ is a bit of good cop/bad cop politicking to distract from the main point.
The mini-policy itself was a mixed bag with no measurable benefit or disbenefit. It had a touch of progressiveness about it in that it stopped the wealthiest just paying off their loans immediately. This means they wouldn’t have been able to pay less for their degrees than those from lower income backgrounds who would instead accumulate interest over a longer loan period. (This of course assumes that the wealthiest don’t just pay their fees upfront).
At the same time it is based on the same principle of ‘early repayment penalties’ for mortgages – if you manage your finances well and are able to pay off early, you are in the wrong and should be made to suffer.
Overall though, it’s like sticking a bow on the proverbial dog mess. It was invented as a distraction from the main problem – after tripling tuition fees, it was a small tweak to make the whole debacle look less horrific.
The truth of the matter is that under the proposed repayment system, many students will never see the end of the loans through salary repayments, and they will have to be written off by the government. Student loans being written off is nothing new, but with tuition fees smashing through the government’s ‘expectations’ after lifting the cap, who will be left to pick up the enormous bills from paying universities and the increasing numbers of loans that will be written off?
By my rough calculations, an average graduate under the system would need a pay rise of about £1350 every year for thirty years for them to actually pay off their loan themselves. Anything less and the government picks up the bill.
The whole system seems to be intent on saddling graduates until they’re fifty-one with debts subsidised and guaranteed by the government, when wouldn’t a simpler, less costly solution be just to subsidise the fees upfront?