Student loan changes in England will cost middle earners £30k, analysis says
Students aiming for high-earning graduate jobs will save £20,000 in loan repayments if they delay university entry, while middle earners face paying £30,000 more over their lifetime, according to new analysis by the Institute for Fiscal Studies.
The IFS analysis highlights how the government’s student loan changes in England, which come into effect next year, have drastically tilted repayments in favour of highly paid graduates.
Students on courses such as medicine, economics and law, which can lead to lucrative careers, would benefit by taking loans under the new format from September 2023, because of the lower rates of interest charged.
In contrast, students who anticipate going on to lower-paid jobs should enrol on undergraduate courses this year to take advantage of loan write-offs occurring after 30 years rather than 40 years, and a higher starting income before having to make repayments, under the government’s changes.
“For 2022 school leavers, this means that incentives regarding whether to take a gap year will crucially depend on their expected future earnings,” the IFS noted.
Ben Waltmann, a senior research economist at the IFS, said: “Student loans reform will reduce the cost of loans for the taxpayer and the highest earners, whereas borrowers with lower earnings will pay a lot more.
“How much more exactly is inevitably uncertain but our best estimate is that lower-middling earners from the 2023 entry cohort onwards face the highest extra cost at around £30,000 over their lifetimes.
“The eventual impact of the reform is hugely uncertain, and will depend on economic developments and on government policy many decades into the future.”
The IFS said the government’s changes – announced in the spring statement by the
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