As part of this move, more graduates would repay this amount monthly, as those with lower salaries would also meet the requirements. This change would have a “huge impact” on students, as it would increase the overall cost of going to college. Mr Sunak is reportedly looking to make drastic changes to student funding as part of his spending review ahead of the October budget, and Martin Lewis has explained why it could have such a huge impact for low-income students.
Speaking in a video on YouTube, the founder of Money Saving Expert said: ‘If we lower the threshold from £ 27,000 to £ 23,000, everyone who earns more than £ 23,000 will pay back 9% of the difference.
“It’s about £ 400 more a year, and the vast majority would pay that off for 30 years.
“It’s £ 12,000 there, a big hit on the cost of education.
“The only people who will benefit would be those who cancel the loan entirely within 30 years, which tends to be the highest paid college leavers and graduates.
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“The fact that they pay off faster means they’ll pay less interest overall.
“What this change does is that it benefits higher earners because they pay less in total.
“But it hurts anyone who earns above the threshold – who is the average graduate of £ 23,000 and over – because they will pay back a lot more, and they’ll pay back a lot more for the entire thirty years.”
Right now, graduates in England on a plan two loan are repaying nine percent of anything they earn above £ 27,295 once they leave college.
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They repay it either until the loan plus interest is paid or it reaches thirty years.
83 percent of those who leave college are unlikely to repay the loan within thirty years, which means the repayments are more like an additional nine percent tax for thirty years.
This means that by lowering the threshold, a lot of people will have to pay a lot more.
Anonymous government ministers have suggested the reduction could reach £ 25,000, but nothing has been confirmed.
Throughout the pandemic, distance learning and limited access to resources was the reality for many students.
With restrictions imposed on the contact that each person might have, college students did not have the full social experience while in school, but they also missed the face-to-face teaching which is preferable.
In addition to this lowering of the loan repayment threshold, young workers are also expected to face the government’s 1.25% hike in national insurance.
Mr Sunak is now accused of starting a generational tax war with young Britons who are footing the bill for the government’s welfare and austerity plans.
On Twitter, many politicians and social mobility experts voiced their opposition to the increase in graduate loan repayments.
Matt Western, Labor MP for Warwick and Leamington, criticized the Conservatives for “widening the gap” between young people of different classes.
Mr Western said: ‘The government plans to lower the student loan repayment threshold to £ 20,000, which will have the greatest impact on female graduates, with those with the lowest and middle incomes ultimately paying around £ 10. £ 000 more.
“But wealthy students would hardly be affected.”
Martin Lewis’ full video can be viewed on his Youtube channel.