A respected think tank whose board members include Nick Clegg, David Willetts, Vince Cable and Chris Huhne has published a report attacking government plans for the new tuition fees loan system as “crazy”. The report, compiled by think tank CentreForum, claims that government plans to penalise early repayment of student loans will hit low to middle income earners and cripple conscientious graduates.

One of the most controversial aspects of the government’s new scheme for higher education, the early repayment penalty has already come under fire from critics and protesters. Unlike the current student loan system, which does not charge interest above inflation, the new scheme will see graduates face interest of up to 3% higher than RPI as they struggle to pay off loans three times higher than current figures when tuition fees soar to £9000.

Until now, it was largely because of these interest rates that the government had been criticised for planning to penalise those who wanted to pay off their loans early. Protesters argued that it represented a greedy attempt to squeeze as much extra interest as possible out of already debt-stricken graduates. But the new CentreForum report is more damning still, using the government’s own figures to prove that it will be conscientious middle-income earners who will be worst hit by the plans.

The government had always defended their early repayment penalty by claiming that it was a way to prevent high earners like city workers and bankers from “buying their way out” of the “progressive” system. This is because interest will rise in line with earnings in the new scheme, so earners safely on their way to a sky-high wage could pay their way out and avoid accruing the extra interest when their income increased later on. However, the CentreForum report destroys this defence using the government’s own figures, which show that those choosing to pay off their student debt early have a relatively low median annual income of just £18,400. This overwhelmingly indicates that the graduates choosing to pay off their loans early are not city fat cats, but hardworking, diligent individuals who simply want to get out of debt as soon as possible, an admirable instinct that the government should be supporting, not punishing.

The report also indicated several other serious flaws in the proposed loan system, most notably pointing out that early repayment would actually be financially beneficial for the government-funded student loan company, especially since the government’s miscalculations on tuition fee costs are going to cost it dearly. It was also suggested that the very rich graduates whom the early repayment penalty would supposedly target actually bypass the loan system altogether by paying their tuition fees upfront.