From education to employment

Student loan system overhaul to benefit millions of students and graduates

Millions of graduates will be able to bin their paper statements and access their student loan account online as part of a major revamp to the system, Education Secretary Gavin Williamson has announced today (30 December).

A new online repayment service will go live in 2020 and will allow graduates to see and manage more up to date information about their student loan balance.

The service is part of improvements to modernise the Student Loans Company (SLC) repayment system and will largely replace annual paper statements – although those who prefer the existing paper statements will still be able to receive them.

To stop students over-repaying their loans altogether, the Universities Minister is also calling on graduates to switch to direct debit towards the end of their loan – rather than continue with automatic deductions from their salary.

Earlier this year, the Government introduced legislation to bring in more frequent data sharing between the SLC and HMRC so students can see more up to date loan balances.

Gavin Williamson 100x100Education Secretary Gavin Williamson said:

“Student loans can remain part of graduates’ lives for many years, so it’s only right we do all we can to improve the system for them. These changes will make it easier for students to understand their balance, manage their loan and avoid over-repaying.

“The student loan system helps make sure anyone with the drive and desire to benefit from our world-leading universities can do so, and it’s right we invest in that system so it works for students and taxpayers.”

Chris Skidmore 100x100Universities Minister Chris Skidmore said:

“With more and more people enjoying the benefits of a university education, it’s only right that graduates have easy access to the information they need about repaying their student loan.

“The Government is investing in the student loans system to make it as simple and easy for people to use as possible. I urge all graduates to use this new service and to join the direct debit scheme as they approach the end of their loan to ensure a smooth end and not repay more than they should.”

From April 2020, graduates will only need to start paying back their loans once they earn £26,575 – a third consecutive annual increase in the repayment threshold. The Government has acted to help graduates keep more money in their pockets in the early stages of their careers.

Under the current student loans plan, borrowers contribute an affordable amount based on their income, only once they reach the salary threshold. The Government subsidises around half of the overall cost of higher education.

Any SLC customer who is unable to use the digital service or requires a paper statement can continue to receive one. Repayments information is now received weekly, rather than annually, from HMRC enabling SLC to provide customers with a more up to date balance. 

Any customer who attends a further education or a higher education course is required to repay their loan as per the terms and condition of the loan, regardless of whether they graduate or complete the course.


House of Commons Library: Student loan statistics

Published Monday, December 16, 2019

Student loans are the main method of direct government support for higher education students. More than £17 billion is loaned to students each year. The value of outstanding loans at the end of March 2019 reached £121 billion. The Government forecasts the value of outstanding loans to be around £450 billion (2018‑19 prices) by the middle of this century. The expansion of loans has raised questions about graduate repayments and ultimately the cost of the system to the taxpayer

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Review of Post-18 Education and Funding

On 19 February 2018, the Prime Minister announced  that there would be a “wide-ranging review into post-18 education” led by Philip Augar. The review is to look at how future students will contribute to the cost of their studies, including “the level, terms and duration of their contribution.” The Prime Minister discounted the idea of moving back to a fully taxpayer funded system. It is expected that the review will report in early 2019.

This paper will be updated with any relevant information or changes that come from the review process.

More detail on the review and associated briefing papers can be found on the page: Review of Post-18 Education and Funding

Student loans are the main method of direct government support for higher education students. Money is loaned to students at a subsidised rate to help towards their maintenance costs and to cover the cost of tuition fees.

Currently more than £17 billion is loaned to around 1.3 million students in England each year. The value of outstanding loans at the end of March 2019 reached £121 billion. The Government forecasts the value of outstanding loans to be around £450 billion (2018‑19 prices) by the middle of this century. The average debt among the cohort of borrowers who finished their courses in 2018 was £36,000.

The Government expects that 30% of current full-time undergraduates who take out loans will repay them in full.

In his summer Budget 2015 Chancellor George Osborne announced that maintenance grants would end for new students from 2016/17 and be replaced by loans. He also announced consultations on freezing the repayment threshold for five years, allowing some universities to increase fees in line with inflation from 2017 and a review of the discount rate applied to the accounting treatment of loans. These are the biggest changes to student finance since 2012. When fully implemented they will mean more money is loaned, both per student and overall, and increase the amount that is repaid by middle and lower earning graduates.

On 1 October 2017 Prime Minister Theresa May announced that there would be changes to the student finance system: the fee cap would be frozen at £9,250, the repayment threshold would rise to £25,000 and a there would be a review of the student finance system.

On 19 February 2018, the Prime Minister announced  that there would be a “wide-ranging review into post-18 education” led by Philip Augar. The review is to look at how future students will contribute to the cost of their studies, including “the level, terms and duration of their contribution.” More detail on the review can be found at: Review of Post-18 Education and Funding

The Review report was published on 30 May 2019, Independent panel report to the Review of Post-18 Education and Funding. The report was a detailed analysis of the post-18 education sector and the funding issues faced by stakeholders. The Library’s briefing paper The Post-18 Education Review (the Augar Review) recommendations give more detail. The forecasts summarised in this note assume the current system, with no changes, is kept in placed. If the Government makes any changes to the loan system or loan amounts in their response to this report (expected in Autumn 2019) then they should publish new forecasts.

Graduates repay student loans to the government after their earnings exceed the threshold level. These loans are therefore private contributions towards the costs of higher education. The student loans system aims to ensure that upfront costs do not deter potential students. Graduates repay student loans and they generally have above average incomes. In the past the loans system has been criticised on a number of different grounds including not covering living costs, excluding part-time students, being too expensive, targeting its interest rate subsidy at higher earning graduates and putting off those who are concerned about graduating with large debts.

This note gives a background to student loans, statistics on their take-up, total value owed, repayment, public expenditure, arguments for reform and factors that affect take-up. It does not look in detail at the repayment system in England for new students from 2012/13 which is included in the note Changes to higher education funding and student support from 2012/13.


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