Minimum wage graduates 'will have to repay loans'

Graduates could be forced to pay off their student loans even if they are on the minimum wage, the shadow business secretary said today during a debate on plans to rise tuition fees.

Unless the proposed £21,000 threshold for repayments is increased along with earnings, in 2022 the lowest earners will still have to start paying back their loans, John Denham said.

With a vote on lifting the current £3,000 fees cap due before Christmas, Mr Denham said Parliament must not be "railroaded" into making a hasty decision.

He said there was still much in the way of detail to be worked out and it was important, for example, to know whether there would be a statutory commitment to uprate the fee cap in line with earnings every five years, as recommended by Lord Browne's higher education spending review.

Students have reacted furiously to plans which could see some universities charge as much as £9,000 a year in fees.

Demonstrations yesterday saw arrests for disorder and protesters in central London "kettled" by police.

Universities Minister David Willetts risked further anger today by announcing the abolition of Aimhigher, a programme to encourage working-class pupils into university.

During the conference in central London, hosted by Universities UK, Mr Denham said: "By 2022 today's graduates will be paying off their loans even if they are on the minimum wage. That is the effect of the trends of wages versus RPI.

"Lord Browne clearly said that the new fee cap should be uprated in line with earnings every five years.

"It's very important before we vote on fees to know whether that will be a statutory commitment."

Mr Willetts said: "The immediate vote that we have before Christmas will simply be a deletion of one figure (£15,000) and the substitution of a new figure (£21,000).

"Of course I realise there are some tricky issues down the track."

Mr Denham said: "Not a shred of evidence has been produced that creating a student market will drive change in the right direction.

"It is a big gamble with one of the best university systems in the world."

He said under the plans most students would become responsible for paying the full cost of their degrees, with some remaining in debt up to 30 years after they graduate.

He continued: "We will oppose the current proposals to raise the fees cap.

"We will defend the principle of publicly funded universities.

"It's also our job to oppose the Government's plans to railroad Parliament into an early decision."

He said it was not acceptable that the Coalition wanted a vote on the fees cap before Christmas while it will only publish a White Paper on higher education in March.

Mr Willetts defended the proposals, saying: "Of course, we have to take the immediate decisions on the fees cap very promptly. That's because of the long run-in times and information requirements of prospective students."

But he was "absolutely committed to delivering a stable transition into the new programme" and seeing the policy delivers the "necessary commitment to getting a grip on the public finances while also ensuring that no student going to university has to pay any money upfront".

Mr Willetts said lowering the monthly repayments and spreading them over a longer period would ease pressure on earners.

Mr Willetts confirmed the abolition of Aimhigher in April next year, saying: "What we believe instead is that the combination of initiatives that Aim Higher has already brought forward can themselves contribute enormously to improving social mobility and widening participation."

He continued: "We are trying to put student choice at the heart of the system and will support this by ensuring institutions provide prospective students with clear and comparable information about course content, teaching methods and the employment outcomes of previous students."

Mr Willetts said: "This is total hypocrisy. Labour are complaining about a threshold of £21,000 when they left behind a threshold of £15,000, which they never uprated.

"Our big increase in the threshold helps the lowest earning graduates. Meanwhile, we are all still waiting for Labour's own policies."

Universities wanting to charge more than £6,000 will have to take part in the national scholarship programme to ensure increasing numbers from disadvantaged backgrounds are enrolled.

The Government's proposals follow a review into student funding led by former BP boss Lord Browne which called for the cap on fees to be lifted.

Lord Browne told the conference it was important to ensure early and high quality guidance for school pupils, so they have the advice and information necessary to choose the best institution.