Lords Committee expresses concern over lack of information on the impact of changes to student loan repayment thresholds

The Secondary Legislation Scrutiny Committee (SLSC) of the House Lords performs a unique and vital role in informing Parliament about a large (and growing body) of secondary legislation proposed by the government. Secondary legislation flows from powers given to government under an Act of Parliament and is subject to a lower level of scrutiny and examination. While a lot of secondary legislation deals with minor or technical changes to the law, some of it has a significant impact on how businesses operate or how people live their lives. As part of our role, we alert the House to any changes in the law which are, for example, of wider interest, or where we have concerns about their impact.

This is why we brought the Education (Student Loans) (Repayment) (Amendment) Regulations 2022¹ to the special attention of the House. The Regulations make changes to the terms of student loans taken out by those borrowers who started studying in academic year 2012–13 onwards (so-called Plan 2 loans). Under current legislation, the repayment thresholds for Plan 2 loans increase every year in line with average earnings. But as a result of these Regulations, the current repayment thresholds for these loans will be maintained and continue to apply in the 2022-23 financial year. This avoids an otherwise automatic 4.6% increase of the thresholds on 6 April 2022. This decision not to adjust to inflation means that a greater proportion of a borrower’s earnings will be taken into account in calculating repayment due.

According to the Department for Education (DfE), maintaining the current repayment thresholds will generate an expected £3.7 billion of savings in public sector net borrowing over the period up to and including financial year 2024–25. DfE says that this will help to ensure the ongoing sustainability of the student loan system. However, these savings for the Government do not come out of thin air, they are found from increased payments by students who have these loans. While we recognise the need for financial prudence in the public sector, we were concerned about the financial impact the changes will have on those with these loans. In particular, we were critical that the Explanatory Memorandum, which was provided alongside the Regulations, did not explain that the result would be additional costs for borrowers with these loans.

When we enquired about this, DfE told us that it expects around a million students to face “slightly higher repayments” of up to £9.45 per month or £113.40 per year in financial year 2022–23. The Department also revealed that it plans to maintain the repayment threshold at the current level for an additional two years up to and including financial year 2024–25. Thereafter, the Government intend to link the annual increases in repayment thresholds to the Retail Price Index rather than average earnings. Explanatory Memorandums are designed to accompany an instrument, so as to provide Parliament and the public who will be affected by any changes in the law with a clear understanding of any such effects and how they will be operated in practice. In this instance, we were particularly concerned that while the Regulations will affect a large portion of the student population and possibly their families, the Explanatory Memorandum, while emphasising the savings Government will make, was silent about the equivalent costs to those who have student loans.

The Committee’s report is available on the SLSC website. We found this unsatisfactory and recommended that the House raise this omission with the Minister. The Regulations will come into force on 6 April, but Members have until 5 May to raise any issues or concerns.

Lord Hodgson of Astley Abbotts, Chair of the House of Lords Secondary Legislation Scrutiny Committee

¹ The Education (Student Loans) (Repayment) (Amendment) Regulations 2022 (SI 2022/301) and supporting information are available on legislation.gov.uk.