Whilst Universities Minister David Willetts and the Coalition government continue obliquely to insist that their controversial new £9000 tuition fees system is “fair and progressive”, yet another highly respected study this week proved that students earning various middle-income salaries could end up paying back up to £85,000 in cash terms in loan repayments.
The study, by leading accountants, was commissioned by BBC breakfast and looked at three case studies based on average students. It assumed that each of the students took out a loan of £9000 for each year of tuition fees, as indications now show that most good universities will be charging the upper limit in spite of hollow government promises that this would only occur in “exceptional circumstances.” The three students were assumed to have taken a moderate £4000 maintenance grant for each year of study; a mid-range figure from the amount available depending on family income.
The study found that depending on the starting salary and ongoing income of each case study, the students would have to pay back between £71,873 and £83,791 in cash terms. The government has claimed that the new system reduces the burden of debt on students by allowing them to pay off their loans at a lower rate over a longer period of time. However they conveniently fail to mention that with the new system allowing for interest of up to 3% above inflation (compared to the current rate, which is set no higher than inflation) these longer repayment periods will result in students being saddled with vastly higher debts due to the enormous interest they will accrue over the period.
So while the government claims to understand the needs of the average, middle income earner, they are in fact using the longer repayment period as a means of lining their coffers with huge amounts of extra interest under an absurd smokescreen of financial leniency. They even plan to introduce fines and disincentives for higher earners wishing to pay off their loans early, to avoid losing out on the vast sums of interest they will accrue by collecting repayments over a longer period. So even students working extremely hard and managing to land a well-paid job soon after graduation will not be able to reap the financial benefits of being economically responsible and trying to get out of debt as soon as possible.
Universities Minister David Willetts has tried hard to focus public attention on what appears to be the attractive side of the scheme; as longer payment periods stretched over more years mean lower individual instalments. But his claim that “I think for many people what will matter the most are lower monthly repayments”, utterly fails to acknowledge the high importance for everybody of not paying back double the amount you have borrowed over a longer period of time!
John Whiting, of the Chartered Institute of Taxation, confirmed that “If somebody takes a significant loan it’s going to take them a long time to pay it back, and they are going to be paying twice even three times the amount if it takes them a long time to pay it back.”