UK graduate loan reforms benefitting richer students than low-earners

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New research shows that the UK's student loan reforms will serve to benefit the country's best-paid graduates but at the expense of educators, nursing graduates, and other lower- and middle-income earners.

Because of one of the biggest reforms for more than a decade, those who earn lower wages struggle to face an increase in their total lifetime repayments of more than £30,000 ($37,378). However, graduates who are the highest-earning graduates will witness lifetime repayments fall on average by £25,000 ($31,148) according to an analysis by the economic consultancy London Economics.

The research predicts that by 2030, a graduate earning £37,000 would pay back £63,100 ($78,619) during their career, as opposed to a graduate earning £70,000 ($87,216) who would pay back just £55,000 ($68,527).

Senior partner at London Economics, Gavan Conlon, explains, “This is effectively a massive subsidy to predominantly white, predominantly male graduates. It’s deeply regressive.”

Royal College of Nursing director for England, Patricia Marquis, called the reforms "a disgrace and will blatantly disproportionately affect nursing staff."

"It means nurses will be paying back their student debt sooner, more of it, and for longer. At a time when there is a recruitment and retention crisis in the NHS, this will only exacerbate it.”

Read more: UK nurses set to strike until Christmas: Union leader

Recently, and in light of these changes becoming more politicized, Labour leader Keir Starmer confirmed that he withdrew from his pledge to abolish tuition fees, but asserted that the Labour Party will “set out a fairer solution” in the coming weeks.

This comes as young voters are now turning away from the Tory party as they struggle in the cost-of-living crisis and high inflation. 

According to the government’s own impact assessment, the student loan reforms are predicted to have a “negative impact” on groups such as women, lower earners and those from disadvantaged backgrounds. 

'Reforms will entrench inequality'

This month, the Welsh government announced that the reforms won't be enforced despite historically aligning its student support system with England, saying that the measures would “disproportionately” impact women graduates and “benefit the highest earners”.

Chief executive of the Intergenerational Foundation, Liz Emerson, said, “These reforms will entrench inequality. The only winners will be the best-paid graduates.”

New loan arrangements for students have been set back in February 2022 by ministers to take effect on August 1 this year, as the reforms extend the repayment period from 30 to 40 years while cutting the salary threshold at which payments are made to £25,000 and interest rates reduced on the repayment of the loan to retail price index (RPI) inflation.

Ministers believe this move will increase the number of graduates who pay off their loans in their which cuts taxpayer support for student loans from 44p in the pound to as low as 23p in the pound. Figures estimated by London Economics say the average debt of first-degree graduates on graduation is about £50,800. 

Chloe Field, vice president for higher education at the National Union of Students, said: “This is yet more evidence the current system is failing students, and society more widely. On top of the pitiful maintenance loan increases, which have failed to keep pace with inflation, and have left students at the mercy of the cost of living crisis, we believe a major overhaul is needed.”

A Department for Education spokesperson said: “It is important that we have a sustainable student finance system that is fair to students and taxpayers."

“Through these reforms, more than half of borrowers will repay their loans in full, compared to the current rate of 20%... To help students who need further support, we have made an additional £15m available, increasing our student premium funding to £276m this academic year.”