Access to higher education should be determined solely by your ability, not your ability to pay. That is why all eligible students can apply for an upfront tuition fee loan to meet the full costs of their tuition fees, as well as to help with living costs.
Student loans are subsidised by the taxpayer and the Government does not make a profit from the loan scheme. Student loans are not like commercial loans, and the way that they are repaid is different from mortgages or personal loans. Student loans also have more favourable terms than commercial loans and are available to all eligible students, regardless of their previous financial history.
Effective from 6 April 2021, those on the post-2012 Plan 2 student loan only have to repay when they are earning over £27,295. Anyone earning below the threshold does not have to make repayments. Deductions are taken at 9 per cent of any income over that threshold and any outstanding balance will be written off after 30 years.
For those who first received their student loans in 2012 or later (‘Plan 2’ loans), interest is set at the Retail Price Index (RPI) + 3 per cent while the student is studying. Once a student finishes their course, interest will be set at RPI for those earning up to the threshold, and it will gradually increase to a rate of RPI + 3 per cent for those earning £49,130 or more from April 2021. These terms are set out in the loan agreements which all borrowers must sign before they can access student finance.
Finally, in 2018 the Government launched a major review of post-18 education and funding and tasked an independent panel to look at how we can ensure that the system is accessible to all, provides value for money for students and taxpayers, incentivises choice and competition across the sector, and delivers the skills our country needs. I am encouraged that the Prime Minister has announced some of the reforms recommended in the Review are being taken forward. This includes making higher education loans more flexible, allowing adults and young people to space out their study across their lifetimes, take more high-quality vocational courses in further education colleges and universities, and to support people to retrain for jobs of the future.