The London Assembly has today
announced its opposition to the Chancellor's decision to freeze
the salary threshold for Plan 2 student loan repayments for three
years.
The Institute for Fiscal Studies estimates that the average Plan
2 Graduate needs to earn £66,000 a year, just to keep pace with
the interest on their loan.
As a result, Plan 2 loan graduates have seen the balance they owe
rise for years and they now owe more than when they graduated,
despite making repayments in every payslip.
Even Money Saving Expert, called the
Chancellor's decision to freeze the threshold 'not moral'.
The Assembly is calling on the government to
abolish real interest rates on Plan 2 student loans, and for the
Mayor to publicly support the proposal.
AM,
who proposed the motion, said:
“Plan 2 student loans were taken out with expectations that
the Government would uphold their end of the
agreement.
“The Government, by freezing the thresholds for repayment,
has breached that agreement and it is graduates who will pay the
price.
“Today the London Assembly has supported my motion calling on
the Government to abolish the above-inflation interest rates on
these loans, to help graduates escape this financial
prison.”
The full text of the motion is:
This Assembly wishes to express its opposition to the
Chancellor's decision in the Budget to freeze the salary
threshold for Plan 2 student loan repayments for three years.
Of the 5.8 million people who took out a student loan between
September 2012 and July 2023, a significant number live and work
in London. These Londoners contribute a substantial amount of tax
revenue to the Exchequer, with many hard working middle and
higher-earning graduates already facing a 50% marginal tax rate.
The Institute for Fiscal Studies estimates that the average Plan
2 Graduate needs to earn £66,000 a year just to keep pace with
the interest on their loan. As a result, Plan 2 loan graduates
have seen the balance they owe rise for years and now owe more
than when they graduated, despite making repayments in every
payslip.
This Assembly notes that the Plan 2 students loan system was
brought in by the Coalition Government in 2012, following their
decision to treble the cost of higher education, by increasing
tuition fees to £9000 per year.
The Assembly also notes that by linking the interest rate to
inflation, the high inflation experienced under the previous
Government significantly increased the interested rate being
charged on Plan 2 student loans.
The Government's decision to freeze the salary threshold for
repayments is fundamentally unfair, punishes hard-working young
people, and is clearly contrary to how the Plan 2 system was
designed when it was introduced.
The Assembly wishes to note Martin Lewis' comments that the
Chancellor's decision to freeze the threshold is 'not moral'.
The Assembly, therefore, calls on:
- The Government to abolish real interest rates on Plan 2
Student Loans, ensuring balances will never rise faster than RPI
inflation and saving graduates thousands of pounds over the 30
year repayment period. The Government should also explore
additional ways to make the Plan 2 student loans system more
progressive.
- The Mayor to publicly support this proposal, and recognise
the tax contributions made by Plan 2 graduates living and working
in London.
Notes to editors:
- The Motion was agreed 14 votes for and 0 votes against.
