English student loan reforms ‘may go against’ levelling up agenda

House of Lords committee warns changes ‘make the system less progressive’ and government ‘should have consulted’ on them

January 24, 2023

The Westminster government’s changes to student loans in England “make the system less progressive” and may be inconsistent with the levelling up agenda, while it should have conducted a consultation given the magnitude of the changes, according to a House of Lords committee.

The Department for Education has introduced a series of changes affecting new borrowers from September: lowering the loan repayment threshold to £25,000 from just over £27,000, extending the repayment term to 40 years from 30 , and lowering interest rates so loan balances increase only with the retail price index (RPI) measure of inflation. Student finance experts have described the changes as benefiting the highest earning – predominantly male – graduates.

Plus, the DfE also delivered what the Institute for Fiscal Studies called a “massive retrospective change” hitting existing borrowers, in particular “lower middling earners”, for up to £19,000 over their lifetimes by switching to index the repayment threshold on the basis of RPI inflation instead of average earnings.

The House of Lords Secondary Legislation Scrutiny Committee draws attention to the student loan changes in its report on the Parliamentary session of 2022-23.

“We recognise that there are many dimensions to fairness and acknowledge the government’s argument that they are seeking to rebalance the contributions made by students and taxpayers,” the committee says. “However, we are concerned that the changes make the system less progressive and may not be consistent with government policy elsewhere, for example in the levelling up agenda.”

The government announced its changes in February 2022 in its response to the Augar review of post-18 education – which reported in May 2019.

“Given the financial impact of the reforms, the number of people affected, the time elapsed since the Augar review and the divergence between the review’s conclusions and the [student loan] regulations, those affected should have been consulted before finalising the policy,” the committee says.

The committee adds: “The government have chosen to implement the changes in a way that significantly increases complexity in the system without explaining why this is necessary. The policymaking process has also not conformed to best practice, for example in the lack of a consultation and the use of the RPI, and the reforms may run counter to government policy elsewhere. The House may wish to raise these concerns with the minister.”

Baroness Bakewell of Hardington Mandeville, a member of the Secondary Legislation Scrutiny Committee, said the DfE “did not follow best practice and introduced the policy based on a review exercise conducted three years ago rather than conducting a more up to date consultation. Given the large number of people who will be affected by these changes, we find this particularly troubling and have suggested that the House seek further information from DfE to address the numerous concerns raised in our report.”


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Reader's comments (1)

It would be fairer to make it an interest-free loan, just requiring graduates to pay back what they borrowed. Apart from being less of a burden on students, there is the ethical argument that the government should not be making money... for if the government has the capacity to make money for itself why on earth should anyone be obliged to pay tax to fund its activities?