The government is quietly
tightening the financial screws on students, graduates and
universities. Students will see substantial cuts to the value of
their maintenance loans, as parental earnings thresholds will
stay frozen in cash terms and the uplift in the level of loans
will fall far short of inflation. This continues a long-run
decline in the value of maintenance entitlements. The threshold
below which students are entitled to full maintenance loans has
been unchanged in cash terms at £25,000 since 2008; had it risen
with average earnings, it would now be around £34,000.
Separately, the student loan repayment threshold will also be
frozen in cash terms. This is effectively a tax rise on
middle-earning graduates. A graduate earning £30,000 will need to
pay £113 more towards their student loan in the next tax year
than the government had previously said. Finally, tuition fees
will remain frozen in cash terms for another year, which hits
universities and mainly benefits the taxpayer. On the whole, as
our updated student finance calculator shows, the government is
saving £2.3 billion on student loans under the cover of high
inflation.
Ben Waltmann, Senior
Research Economist, Institute for Fiscal Studies: ‘The
government seems determined to use high inflation as a cover for
reducing the taxpayer cost of student loans. Large real-terms
cuts in maintenance loans could cause genuine hardship for
students on tight budgets. A freeze in the repayment threshold
mostly hits middle-earning graduates, whose budgets are already
being squeezed by the rise in the cost of living, the freeze in
the personal allowance and the hike in National Insurance. And
the extension of the freeze in maximum fees will add further
pressure on universities, while only benefiting the
highest-earning graduates.’
