The government’s student loan reforms will benefit the country’s best-paid graduates at the expense of nursing graduates, teachers and other lower- and middle-income earners, new research reveals.
Under the biggest reforms of student loans in England for more than a decade, many lower-paid earners face an increase in their total lifetime repayments of more than £30,000. Meanwhile, the highest-earning graduates will see their lifetime repayments fall on average by £25,000 compared with the previous arrangements, according to an analysis by the economic consultancy London Economics.
The research forecasts that a graduate earning £37,000 by 2030 would pay back £63,100 over the course of their career, while a graduate earning £70,000 would pay back just £55,000.
Gavan Conlon, a senior partner at London Economics, said: “This is effectively a massive subsidy to predominantly white, predominantly male graduates. It’s deeply regressive.”
Patricia Marquis, Royal College of Nursing director for England, said: “These changes are 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.”
Student funding and tuition fees have become big political issues for all the main parties. Labour leader Keir Starmer has confirmed he has dropped his pledge to abolish tuition fees, but has said his party will “set out a fairer solution” in the coming weeks. Many young voters struggling in the cost of living crisis are now turning away from the Tories.
The government’s own impact assessment said the student loan reforms were more likely to have a “negative impact” on certain groups, including women, lower earners and those from disadvantaged backgrounds. A House of Lords scrutiny committee has warned the reforms contradict the government’s levelling-up agenda.
The Welsh government announced this month that it will not implement the reforms despite historically aligning its student support system with England. It said the measures would “disproportionately” affect women graduates and “benefit the highest earners”.
Liz Emerson, chief executive of the Intergenerational Foundation, which promotes the interests of younger and future generations, said: “These reforms will entrench inequality. The only winners will be the best-paid graduates.”
Ministers announced a package of reforms in February 2022 that include new loan arrangements for students from 1 August this year, but the full consequences of the changes have become clearer from recent modelling.
The reforms extend the repayment period from 30 to 40 years, cut the salary threshold at which payments are made to £25,000 and reduce interest rates on the repayment of the loan to retail price index (RPI) inflation. Graduates repay 9% of their income above the threshold.
Ministers say the measures will increase the number of graduates who pay off their loans in their entirety, cutting taxpayer support for student loans from 44p in the pound to as low as 23p in the pound. The average debt of first degree graduates on graduation is about £50,800, according to figures calculated by London Economics.
The reforms also affect those who have already graduated. Those who took out loans from 1 September 2012 to 31 July 2023 will have the repayment threshold frozen at £27,295 until 2024/25. It will mean they will end up paying more of their income towards their loans than if the threshold had risen in line with inflation.
The lower threshold at which repayments start, and the 40-year repayment period for new borrowers, mean lower- and middle-income earners will now pay significantly more. It means in many cases that lower earners will pay more in total than the best-paid graduates, paying back the loans and more accumulated interest over a longer period.
The measures form part of the government’s response to Sir Philip Augar’s review of post-18 education and funding published in May 2019. The review recommended reintroducing maintenance grants for disadvantaged students, but this was not adopted.
Nearly all nursing graduates will face a significant increase in their lifetime loan repayments. For male nurses, average lifetime repayments are expected to increase by £17,600, from £24,400 to £42,000; for women, the increase stands at £15,300, from £10,700 to £26,000, according to forecasts by London Economics. The government’s own figures reveal that lower-paid earners will see total repayments increase by up to 174%.
The Institute for Fiscal Studies says the reforms may make university less attractive for those who don’t expect to be high earners. “In these reforms, lower earners pay more and higher earners pay less,” said Ben Waltmann, senior research economist at the IFS. “Lower to middle earners like teachers and nurses will lose out the most.”
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.”
Officials say that while lifetime repayments will decrease for the highest earners under the new arrangements, the lowest earners will still be required to contribute the least. It says the system is “progressive overall”, that any adverse impact on particular groups is as a result of their lifetime earnings, and “overall the equality impacts are mixed”.
A Department for Education spokesperson said: “It is important that we have a sustainable student finance system that is fair to students and taxpayers.
“We have cut interest rates to RPI only so that new borrowers will not repay more than they originally borrowed, when adjusted for inflation. 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.”
