Students starting university courses in 2023/24 will have to begin paying back their loans once they are earning more than £25,000, the Government has announced.
The threshold for new students starting courses will be set at £25,000 until 2026-27, whereas the current salary threshold for repaying student loans is £27,295.
The Government said this would mean that a graduate earning £28,000 would pay back £17 a month.
Interest rates will be cut for new students so their loan balance rises with the rate of inflation.
The student loan repayment period will also be extended to 40 years for students starting courses in September 2023.
We all know that there are young people that get three Es every year that feel compelled and pushed to go to university before they're ready, and I think that that is doing them a disserviceMinister Michelle Donelan
The long-awaited Government response to the Augar review into higher education funding also announced a “clampdown on poor-quality university courses that don’t benefit graduates in the long-term”.
Students who did not gain grade 4 GCSE passes in maths and English, or two E grades at A-level, would potentially be blocked from accessing loans.
A consultation published on Thursday considers the introduction of minimum entry requirements “to ensure students aren’t being pushed into higher education before they are ready”, as well as student number controls.
The second consultation sets out plans for delivering a Lifelong Loan Entitlement for people to “retrain flexibly at any time in their lives”, worth the equivalent of £37,000, or four years of post-18 education.
The Department for Education said the changes would “rebalance the burden of student loans more fairly between the student and the taxpayer and ensure that in future graduates don’t pay back more than they borrowed in real terms”.
The reforms would mean that more than half (52%) of students who take out a loan to start a full-time university course will repay this in full, while under 25% were expected to repay their loans fully if the changes did not go ahead, the Government said.
Tuition fees will be capped at £9,250 for a further two years, while student loan interest rates will be set at no higher than the rate of inflation from 2023/24.
The Government said this meant that a student starting a three-year course in 2023/24 could see their debts reduced by up to £11,500 at the point where they had to start repaying the loan.
Higher and further education minister Michelle Donelan said the consultation on minimum entry requirements for loans made it clear this was not a “definite” direction of travel.
“But it is something that I think it’s right that we explore as an option. We used to have an entry requirement in this country of two Es,” she said.
“We all know that there are young people that get three Es every year that feel compelled and pushed to go to university before they’re ready, and I think that that is doing them a disservice,” Ms Donelan added.
She said the requirements would have exemptions for mature students, and that pupils who did not pass English or maths GCSE but went on to get the equivalent of three Cs at A-level would also be exempt.
In 2021, 4,800 students entered higher education without passes in English and maths GCSE.
Ms Donelan said the changes were “absolutely not” about getting fewer people to go to university.
“This isn’t about pushing people to or away from university – this is about having a system that’s designed to be geared up to the individual,” she said, adding that the “obsession” with targets or quotas for students needed to end.
“This is a Government that is committed to real social mobility, and real social mobility is not getting somebody to the front door, so it’s not about getting a kid to university and then job done,” she said.
This package of reforms will ensure students are being offered a range of different pathways, whether that is higher or further education, that lead to opportunities with the best outcomesEducation Secretary Nadhim Zahawi
“That’s not job done if they then drop out after a year or they then complete that degree and it never leads them to a graduate job – that’s not a quality education and it’s not a quality outcome.”
Ms Donelan said the £161 billion debt on the student loan book as of April 2021 was a “sizeable sum” and that there needed to be “a fairness for the taxpayer as well as for the graduate”.
The announcement on Thursday included plans to cut the cost of foundation year courses and a new national state scholarship to support high-achieving students from disadvantaged backgrounds access higher education, further education and apprenticeships.
Education Secretary Nadhim Zahawi said: “Our country’s world-leading universities and colleges are key to levelling up opportunity by opening up access to a range of life-long, flexible post-18 options to help people train, retrain and upskill.
“This package of reforms will ensure students are being offered a range of different pathways, whether that is higher or further education, that lead to opportunities with the best outcomes – and put an end once and for all to high interest rates on their student loans.
“I am delighted to see such a substantial amount of investment – nearly £900 million – reinforced by a revised, fairer and more sustainable student finance system which will keep higher education accessible and accountable.
“These changes will create a fairer system for both students and the taxpayer.”
Ms Donelan said: “We are delivering a fairer system for students, graduates and taxpayers as well as future-proofing the student finance system.
The Skills Bill already going through Parliament, the lifelong learning entitlement, the reforms to student finance and the refocusing of HE provide a framework that is fair, sustainable and has the potential to drive the whole economy forwardSir Philip Augar, chairman of review into higher education
“We are freezing tuition fees and slashing interest rates for new student loan borrowers, making sure that under these terms no-one will pay back more than they have borrowed in real terms.”
She added: “We are investing an extra £900 million in our post-18 education system and bringing about revolutionary change in the way students can study, retrain and upskill throughout their lifetime.”
Sir Philip Augar, chairman of the Augar review into higher education, said: “The Skills Bill already going through Parliament, the lifelong learning entitlement, the reforms to student finance and the refocusing of HE provide a framework that is fair, sustainable and has the potential to drive the whole economy forward.”
Here are some of the key figures:
– If the system were left as it currently is, graduates would pay 59 pence in every pound of their loan back over the lifetime of their loans. Under the reforms, graduates will pay 81 pence of every pound back.
– This means that the Government’s Resource Accounting and Budgeting (RAB) charge (the cost to Government from borrowing to support student loans) will halve. Under the current system, in 2026-27 the RAB charge is expected to be 41% but under the new reforms it will fall to 19%.
– In 2019/20, 40% of 19-year-olds had not achieved two E grades at A-level or their equivalent and 29% had not achieved a GCSE pass in English and maths.
– The number of students who entered university without GCSE passes in maths and English in 2021 was 4,800.