Student loan repayment rate could be put up soon, Minister says

Graduates with existing loans would have to pay more

Graduates could soon be paying more (Getty Images)

The repayment rate on existing student loan debt could be increased by the Government within the next few years, the Business Secretary has confirmed.

Sajid Javid said he could not rule out retroactively increasing the amount graduates had to pay out of their salary before the next election.

Graduates currently pay 9 per cent of their income above a £21,000 repayment threshold, but the Business Secretary said the threshold or repayment rates might have to go up to stop budget pressures getting “out of control”.

The minister appeared on Wednesday in front of Parliament’s Business, Innovation and Skill Committee, which scrutinises university funding.

Labour MP Paul Blomfield asked Mr Javid whether he had “any intention of changing either the threshold or the interest rates within the lifetime of this parliament”.

Mr Javid replied that he could not “commit” to such a pledge.

“I can’t tell you here and now that any of those numbers I’ve mentioned [repayment rate, repayment threshold, length of loan] can’t change during the life of this parliament but there are no current plans. It’s something that I just don’t think I can commit the government to,” he replied.

“In terms of what’s going to be uppermost in our mind in making these types of decisions is just making sure at all times what we have set up … is sustainable for the long term: the RAB charge doesn’t come out of control, and also that it doesn’t in some way, that if we did have a change it ends up capping the number of students.”

The “RAB charge” is the Government’s estimate of the portion of state loan expenditure that will never be repaid by graduates.

Mr Blomfield told the minister that graduates felt “sore” that the threshold had previously changed “in conflict with the contract that they thought that they had”.

Mr Javid added that he wanted to see the higher education system accessible to all people regardless of income and that there should be no cap on student numbers.

Tuition fees were introduced in 1998 at £1,000 by the last Labour government. They were later trebled to £3,000 in 2004.

In 2012 fees were raised to £9,000 by the Coalition government – including the Liberal Democrats, who had pledged to vote against any rise in fees and had advocated free education.

Tuition fees have been abolished in Scotland where university education remains free. Many other European countries continue to offer free education or have negligible fees. Labour leader Jeremy Corbyn has said he would like to scrap university tuition fees.