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Legal Action Over Changes To Student Loan Repayments

Changing The Repayments Threshold

In a new controversial move, George Osbourne has decided to freeze the repayment threshold for university students. Osbourne, the Chancellor of the Exchequer is freezing the income level at which students start making repayments at a constant £21,000 as opposed to letting the threshold rise each year to reflect rising average wages. Osbourne’s critics have hit back accusing the Chancellor of breaking the contract that links the threshold to earning levels and he could now face serious legal action. The decision to fix the threshold came as part of the Autumn Statement but was omitted from Osbourne’s speech to the Commons; he is also said to have been hiding the change amongst the small print.

Putting Less Well-Off Students Off University

Opposition to the freeze say the change would result in a previous student paying over £300 more in 2020-21 than they would in 2016-17. Osbourne’s changes would take effect for anyone who took out a student loan since 2012 despite those students taking them out thinking they would be making repayments in line with their wages. The worry is that this change will break the trust students have in the loan system and could even discourage potential university applicants who come from poorer backgrounds. Consumer advice specialist Martin Lewis was outraged by the decision and said that his own legal team were considering taking legal action against the Chancellor.

The Opposition Fight Back

This is deeply disingenuous and will severely undermine students’ trust in the higher education funding system.’ Said Sally Hunt. Hunt is from the Universities and College Union which is a union that represents a broad range of academics.

She went on to say that the decision would be ‘a real financial blow to lower-earning graduates and … sends precisely the wrong message to students from disadvantaged backgrounds who are understandably concerned about the rising cost of university.’

The new frozen threshold was originally set to increase year on year but the changes could be very lucrative for the Exchequer. It is expected that by the year 2020-21, it would bring in an extra £360 million and make a step towards the government target of reducing government debt.

The founder of Moneyspermarket.com said that if the UK government had been a commercial business they would not be permitted to change the terms of a contract after it had already been signed which is why their legal team are looking to take legal action against the government. He already has the backing of a number of Vice Chancellors who agree with his argument.

One lecturer, Dr Nimmo from Manchester University gave his opinion on the matter saying the decision was ‘a retrospective attempt to plaster over this colossal miscalculation’. He was speaking about the current prospects for graduates being far from bright and the possibility that many student loans will have to be written off.

With many opposed to the changes, with good reason, the Chancellor will have a challenge ahead of him going into the New Year.

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