Your student loan repayments increase by £110 a year

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A woman shows a man holding a ten pound note

Photo: Andrew Boyers/Reuters

There is a recently resurfaced clip from 2006 of Boris Johnson explaining his theory for dealing with the media and the general public. “I have a brilliant new strategy,” he says, “which involves making so many blunders that no one knows what to focus on.”

You have to have it for him: it works! Many of us were so wrapped up in our rising energy bills or if he was throwing a lockdown ABBA party that we didn’t even time student loans are going to cost us, on average, an extra £110 per year from April this year.

Why has my student loan payment increased?

Each year, the government raises the 4.6% payment threshold on student loans based on various factors, such as the cost of living. This year, they decided not to raise that threshold and freeze it instead.

What is the reimbursement threshold?

No one has to pay off their student loan until they earn more than a specific amount. Right now it’s £27,295. The government typically raises this threshold each year, so you continue to pay the same amount in reimbursements even as you progress in your career and earn more money. But because they are not raising the threshold this time around, university graduates will now have to shell out £3,000 more than expected during their refunds.

Does this affect me?

This decision affects people who are on a Plan 2 student loan, which is basically anyone who started university in England, Wales or Northern Ireland from 2012. It also hits postgraduate students in England and Wales who took out a loan for their masters or postdoctoral on or after 1 August 2016 – the repayment threshold will be frozen at £21,000 meaning they will pay £87 £ more every year.

Has this ever happened?

Not like this but there have been plenty of times where students have paid the price more than other parts of society including when Nick Clegg got everyone to vote Lib Dems on the promise he would eliminate student loans altogetherto form a coalition government with the Conservatives and triple them instead.

How can the government just change the rules on our loans?

Well, technically the government is constantly adjusting our loans, says James Yelland, communications and marketing manager at The Money Charity. “You think of fixed and variable interest rates on a savings account. Banks usually offer a lower fixed rate because they are obligated to meet this commitment,” he explains. “Whereas if you opt for a variable rate, you will probably get a better offer, but then the banks have a little freedom to play with it. They have a little more leeway, and in what they can do with your money.

Essentially, student loans are variable rate loans, which means you get a better overall deal. corn the government can make changes based on a whole host of factors it dictates.

Why is this particular change worse than other changes?

Along with an impending National Insurance hike, it’s another way the government is trying to recoup pandemic-related spending from low-income people while still offer tax breaks to the wealthy, “It breaks a political commitment that has been in place for a decade,” Yelland says of the threshold change. “That’s obviously one of the things they decided they needed to claw back some extra money for the government.” Deeply frustrating.

What do the students think?

Unsurprisingly, the National Union of Students is not a fan. “The concept of a reimbursement threshold only exists because this government would rather commercialize higher education than treat it as a public good,” a spokesperson told VICE. “They should define their priorities, stop seeing education as a commodity to be bought and sold for individual gain and abolish tuition fees. Only then can we begin to build the student movement’s vision of a fully funded, accessible, lifelong, and democratized higher education system.

What does the government have to say about this?

In a post on a government blog called The Education Hub, which reads like someone is trying to assault you in the most polite way possible, they do it because “the cost of higher education to the taxpayer is rising, therefore the government wants to ensure that the student loan system is underpinned by sustainable financing mechanisms, so that it provides good value for money both for those who benefit from higher education and for the taxpayer”.

He continues: “The median annual earnings of young graduates rose from £24,500 to £28,000 between 2016 and 2020, and in 2020 they generally earned £6,500 more per year than their non-graduate counterparts”. The use of pre-pandemic statistics seems particularly dodgy here, especially because in the fiscal year ending in 21, a third of all workers have seen their household income drop and one in four has been furloughed.

How is the government just allowed to modify our loans?

Well, they technically didn’t change the loan agreements. They are right do not have changed the reimbursement threshold based on income, inflation and a whole host of other factors like the cost of living. Sneaky shit.

Who benefits from the student loan?

Despite the fact that the government has historically sold chunks of the nation’s student loan debt For individuals and businesses who want to take advantage of the system, the majority of student loans are still owned by the government, which means that this threshold freeze will help pay down the national debt or go to more ABBA parties… who knows?!

What if I can’t afford to repay my student loan?

Yelland says not to worry too much. “Obviously if you had averaged over the year that means £10 less on your payment package. But it’s kind of one of those nebulous concepts of money that was never there anyway,” he explains. Essentially, like National Insurance, which is taken directly from your salary, “you will never see or have [the money] in your hands.”

In short, you can’t default on your student loan payments because they’re automatically deducted from your paycheck, but you might feel the squeeze on other parts of your budget because of it. In all cases, student loans are canceled 30 years after your graduation date. Not long, huh?

@rossy

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