Former Conservative ministers have condemned the 12% rise in student loan interest, saying it could put off students from lower-income backgrounds from attending university for fears of accruing stratospheric levels of debt.
Senior Tories are now calling on the government to step in to alleviate these symptoms of high inflation rates, over concerns that young people capable of undertaking a degree will be less likely to apply to university.
‘It is a breach of what students expected’
Former business secretary and universities minister Greg Clark told the Observer that these high rates would prevent graduates from developing skills badly needed in the UK job market.
‘It is a breach of what students expected – that interest on loans would be no higher than market rates. And it risks frightening off new students from entering higher education, even in courses like science and engineering, at a time when the economy desperately needs these skills.’
He added: ‘When conditions are turbulent the government needs to be agile in taking quick action to head off unintended consequences.’
‘The current position is unsustainable’
Chris Skidmore – former universities minister who served under Boris Johnson – concurred, telling the Guardian: ‘Some might argue that many students may never pay back their loans, so high interest rates are irrelevant, but the key point here is that the additional perceived debt burden created by interest on loans is putting many young people off even thinking about university, when this could be a route for transforming their lives.
‘We can’t, as a country, afford for people from disadvantaged backgrounds not to fulfil their potential because of the looming shadow of debt and interest rates. When students are facing repayments of more than twice the amount they actually borrowed, regardless of whether they pay it back, we have taken a wrong turning.
‘I have long called for action on this, even back as university minister in 2019. Then, rates were 6% – with students facing a doubling of this figure, the current position is unsustainable.
The current loan plans mean that graduates from England and Wales, who took out a student loan after 2012 and are earning over £49,130 per year, are faced with the maximum 12% income tax on their loan repayments, which is connected to the current RPI (Retail Price Index) inflation rate.
With the usual student loan debt standing at around £50,000, recent high-earning graduates will end up paying an extra £3,000 in interest – there are plans for a cap on interest payments next year that will hopefully render the spike temporary. But many, including these senior Tories, are calling for an immediate cap.
