UK Education Secretary Bridget Phillipson has defended freezing the repayment threshold for student loans in England, saying graduates will only pay back £8 more a month on average.
She said ministers would look again at the issue, but added that “there are challenges across education and government and we can’t fix everything at once”.
Speaking to BBC Breakfast, she confirmed that the threshold at which graduates begin to repay their Plan 2 loans will increase as expected in April, before the freeze comes into effect next year.
It comes after some graduates told the BBC that student loan repayments linked to their income had led them to cut their work hours and slash their salaries.
Tinuke Bamiro, 24, says money she makes from social media videos on top of her consulting job has pushed her into the higher-rate tax band, meaning she pays 40p in tax for every £1 she earns between £50,271 and £125,140.
With a Plan 2 student loan, she also pays 9p of every £1 she earns over the current repayment threshold, £28,470. That threshold will rise to £29,385 in April, then be frozen for three years, instead of increasing with inflation.
“The amount that I have to repay, especially on the income I make outside of my nine to five, is a lot,” she says.
There has been growing debate in recent months around Plan 2 student loans, which were issued to undergraduate students in England between September 2012 and July 2023 and are still issued in Wales.
Campaigners have called on the chancellor to reverse the planned threshold freezes. The government said it had made a “tough but fair” decision.
Plan 2 loans accrue interest from the day they are taken out, at a rate of 6.2% while you’re studying. It rises later – in the April after your course ends in most cases – to the Retail Price Index (RPI) measure of inflation, plus up to 3%, depending on earnings.
Tinuke has started increasing her pension contributions to reduce the amount of her income that’s subject to higher‑rate tax and student loan repayments.
“I think this is a good alternative in some ways, in that I get to keep more of the money I make as opposed to just never seeing it again,” she said.
“But I also need a lot of the money now. I’m trying to save. I’d like to get on the property ladder and save for a deposit, and I can’t do that if I’m putting all my money in a pension.”
Tinuke borrowed around £75,000 for her economics and business finance degree at Brunel University. But, because of the Covid pandemic, she said the first two years of her degree were remote. She now owes nearly £90,000.
She said the university did a good job considering the circumstances, but added: “I definitely feel like my first two years were not worth what I paid.”
This month, University College London reached a settlement with graduates and students who launched legal action over teaching quality during strikes and Covid lockdowns.
Now a further 36 universities are facing legal action, though Brunel University is not one of them.
Brunel University said the pandemic “was a challenging period for the whole country and throughout this time, our priority was to ensure students could continue their education and feel supported in doing so”.
It added: “We maintained teaching and provided a range of wellbeing and financial support services including rent waivers, rent credits, rent-free periods and other initiatives to support our student community who were unable to use their rooms during parts of the academic year.”
