MILLIONS of graduates will be forced to pay a £113 increase in student loan payments from April.
Ministers have scrapped plans to raise the student loan threshold to 4.6% for the first time in three years, which would affect middle-income earners the most.
The Institute for Fiscal Studies has warned that the freeze will cost people making £30,000 more than £113 a year more than before.
That means graduates will have to cover additional income as wages and prices rise with inflation.
IFS senior economist Ben Waltmann said it “effectively constitutes a tax increase by sneaking up on middle-income graduates,” as well as it being “a powerful effect.” than real income”.
‘Plan 2’ graduates, which are loans issued after 2012, will pay back their loans at 9% on top of all they earn over £27,295 a year.
This threshold has been increased from £25,000 in 2018/19, £25,725 in 2019/20 and £26,575 in 2020/21 to keep up with rising prices.
But it will freeze for now – although inflation has hit 4.8% and economists warn it will rise further in April.
The ‘Plan 3’ threshold will also remain at £21,000 – while tuition fees will be frozen at £9,250 for the fifth year in a row.
The change in policy was revealed this afternoon in a written statement to Parliament, The Mirror reported.
A Department for Education spokesman said: “It is more important than ever that higher education is underpinned by a sustainable funding and financing system.
“We need to make sure the system remains fair and open to all who have the ability and ambition to benefit from it.”
However, Mr. Waltmann warned this was “an even stronger impact on the real incomes of these graduates due to rising costs of living, frozen personal benefits and National Insurance rates.” increase”.
He continued: “The lowest-income graduates do not reach the repayment threshold for student loans, so they will not be affected by the freeze.
Another hit to real earnings
“The top earners will pay off their loans, so the freeze just means they’ll pay back their loans faster.
“For a recent graduate earning £30,000, this announcement means they will pay £113 more on their student loan in the next tax year than the government has said before. this.”
IFS director Paul Johnson added: “That would be a 6 or 7% reduction in real terms and therefore a real increase in terms of c. £150 a year for graduates with student loans.
“Not an obvious response to the ‘cost of living crisis’.”
Universities minister Michelle Donelan defended the move, saying “the overall cost to taxpayers of the system is rising”.
She explained that the government will “soon lay out further plans” to reform the system, which it has claimed could reduce the debt repayment threshold to £25,000.
Shadow Colleges Minister Matt Western said: “We have a Cost of Living crisis in Downing Street.
“While No10 is crippled, Rishi Sunak is raising taxes on millions.”
https://www.thesun.co.uk/money/17476869/graduates-face-113-rise-in-students-loans/ Graduates face £113 rise in student loan payments from April in new ‘sneaky tax hike’