A Conservative thinktank in the United Kingdom says the government’s proposal to cut interest rates on student loans will only benefit graduates who were highly paid.
In a warning to Philip Hammond, the Chancellor and head of the government’s treasury who has been urged to cut rates as his conservative party looks to win back youth votes, think tank Bright Blue said it would only benefit graduates who were better off.
“The Conservative government needs to and should make a big offer to young people. But reducing tuition fees or reducing the interest rate on student loans would only benefit high-paid graduates,” the think tank’s chief executive Ryan Shorthouse said, as quoted by The Guardian.
Rather than slashing the interest rates, Shorthouse said the government should raise the earning threshold at which graduates start to repay their loans. Currently, the threshold is set at GBP21,000 (US$27,700) but was expected to be frozen until 2020.
“This would mean all young people repaying student loans would pay a smaller amount from their salaries each month. It would effectively be a tax cut for graduates.”
Hammond had earlier called on suggestions from MPs about wanting to help young people who were burdened by debt.
Since the election campaign, Jo Johnson, the Universities Minister, has defended the education funding system — when the debt burden and high-interest rates, which can be above six percent for some students — came to the fore.
“We will continue to look at the details of the student finance regime to ensure it remains fair and effective. But getting rid of fees does little to help young people: indeed, by reducing access to education, by damaging the viability of our universities, and by piling tens of billions on to the national debt, it does precisely the opposite,” Johnson said in July.
However, Prime Minister Theresa May’s former chief of staff Nick Timothy has called the loan system an “unsustainable Ponzi scheme”.
The Guardian cited research by the Institute for Fiscal Studies which suggested that three-quarters of graduates will not pay off their loans in full, even if they continue making payments into their 50s.
The opposition Labour party has said it would continue to press for the abolition of fees.
“Burdening young people with a lifetime of debt is neither fair nor sustainable. We have long called for action to reduce the burden of debt faced by students, in particular, those from the most disadvantaged backgrounds, but time and again the Tories have refused to listen,” shadow education secretary Angela Rayner said.
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