Are you a well-off, male, recent graduate?
If so, great news! Andrea Jenkyns has decided to cut the amount you pay back on your student loans in the next year – the already announced discounted interest rate of 7.3 per cent has been slashed by a whole percentage point, to 6.3 per cent. Jim Dickinson predicted this change in noting that that the initial calculation was performed in an unhelpful and non-standard way – and it has come to pass that DfE has again corrected itself.
If you are an existing student, or a graduate working at a regular job, this will have little-to-no impact on what you repay. Most people will continue to pay 9 per cent of their salary (over the threshold) for the full 30 years – reducing the interest rate simply means that the best paid graduates will get to stop paying earlier.
So when minister for skills, further and higher Andrea Jenkyns says:
We understand that many people are worried about the impact of rising prices and we want to reassure people that we are stepping up to provide support where we can
…the government is actually doing nothing of the sort.
DfE’s press release trumpets that future graduates starting their course in the autumn of 2023 will be subject only to the base rate – so you might ask why it is that the government doesn’t just do that for all graduates. That’s because if what it’s keen to not highlight (or even mention in this release) – any benefit that moving only to base rate interest brings (again, largely to better off graduates) will be swallowed up by a new requirement to repay for 40 years – or until the average graduate is aged 61.
All these interest rate reductions cost the treasury money – money that needs to be recouped. And whereas some people would support an increase in, say, student maintenance support for those who will be struggling this academic year paid for by a worsening of future loan terms, I can’t imagine anyone taking much delight in the fact that a young hedge fund manager can stop paying what is essentially (can we finally admit this, ten years on?) a graduate tax earlier than a social worker, chorister, or pharmacist.