Student loan changes 'hidden' in schools bill

Pa,Alison Kershaw
Thursday 27 January 2011 16:45

Ministers were accused of "hiding" student loan reforms in the new Education Bill.

A clause in the newly-published Bill will make higher-earning graduates pay back their university loans at a higher rate of interest.

It emerged yesterday that the measure had been tacked on to the Education Bill, which focuses mainly on school reforms.

Sally Hunt, general secretary of the University and College Union (UCU), said: "The general public will see this for what it is - a stealth tax on learning and achievement - and it doesn't matter what piece of legislation the Government tries to hide it in.

"Sneaking these plans into a schools bill is yet another indication that the Government has lost the argument on student funding and is terrified of further scrutiny of such a punitive policy.

"Graduate unemployment is at a 10-year high, yet the Government has introduced policies to increase student debt to record levels and then charge even higher rates of interest. Surely now the Government will stop trying to spin these damaging and unfair policies as progressive."

Pam Tatlow, chief executive of university think tank million+, said: "The plans tagged on to the Education Bill give the Secretary of State free rein to set uncapped and commercial rates of interest on student loans.

"There is no commitment to protect the poorest graduates from commercial rates and no promise, as previously announced, to cap the interest rate at 3% plus RPI or set a tapered rate of interest for those earning between £21,000 per annum and £41,000 per annum so that only the very highest-earning graduates will be subjected to higher interest rates.

"Students and their parents are being left in the dark about what interest rates might be applied to their loans once they graduate. An interest rate of RPI alone could add well over £1,000 a year to a student's debt, given the much higher levels of tuition fees that Parliament voted through at the end of last year."

Aaron Porter, president of the National Union of Students (NUS), said: "The Government's misguided approach of forcing higher fees and higher loans is fundamentally flawed, and ministers are now passing considerably higher interest rates on to students before safeguards for students have even been properly discussed and scrutinised.

"Under the Government's scheme, higher interest rates will hit those students who have to take out fee loans the hardest, whilst wealthier students who do not have to take out loans will escape higher interest charges."

Universities are covered by the Department for Business, Innovation and Skills (BIS) and the Bill was published by the Department for Education (DfE)

The Government has said that the proposal was included because the changes need to be in place before higher tuition fees, and the new funding system that comes with it, come into force next year.

A BIS spokesman said: "The Bill will enable us to implement the remaining elements of the student finance reforms.

"It will allow us to set by regulation the progressive repayment system and will provide extra protection for part-time students by prescribing the maximum fee they can be charged. We will publish the detailed regulations as the Bill progresses."

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