Student loan repayment thresholds and fairness

The request was partially successful.

Dear Department for Education,

In 2014 a submission was made to David Willetts, then universities and science minister, which considered options on the pre-2012 ICR student loan repayment threshold, resulting in a decision to remove the time-limit to the student loan repayment threshold adjustments to regulate for continuing threshold adjustments annually by RPI beyond the initial April 2015 end date - Regulation 4 of the Education (Student Loans) (Repayment) (Amendment) Regulations 2014 (http://www.legislation.gov.uk/uksi/2014/... )?

1. Please (a) confirm whether it considered any other options other than continuing to uprate by RPI and (b) release the submission/recommendation document.

This decision was highly significant for pre-2012 student loan borrowers given the recent announcement that the post-2012 ICR student loan repayment threshold is to be lifted even further from £21,000 to £25,000 and then indexed to earnings, as it turned out to be the last opportunity for these borrowers to have their threshold raised beyond inflation. Pre-2012 borrowers did not benefit from the "one-off increase" to £21,000 (from £15,000) recommended by the Browne review because of the threshold being frozen at £15,000 between 2005 and 2012, only new borrowers did, yet existing post-2012 borrowers will benefit from the latest hike from £21,000 to £25,000 despite the £21,000 threshold meant to be frozen until 2021, meaning pre-2012 borrowers miss out again.

2. Please release any submissions made to ministers on the 5 year freeze that was meant to be applied to the £21,000 threshold between 2016 and 2021.

There is one group of borrowers who these decisions to hike the threshold to £25,000 while leaving the pre-2012 threshold much lower adversely impact on, namely borrowers who are repaying loans under both pre-2012 and post-2012 systems. A majority of these borrowers will be those who took a first degree before 2012 and then a PGCE from 2012 onwards. The decision to hike to £25,000 is detrimental to these borrowers as it does not reduce the mandatory repayments (as the pre-2012 threshold is not being hiked) but it does change the division of the repayment above this threshold between the pre-2012 and post-2012 loans in a way that is seriously unfair given both where average earnings are nationally and the earnings trajectories of the majority of these borrowers who are teachers. The salary for a qualified teacher starts significantly above the pre-2012 threshold but below the post-2012 threshold. Thus, these teachers will be making repayments towards their pre-2012 loans until these loans are paid off or (more likely) written off after 25 years (for pre-2012, post-2006 loans) and then because the higher post-2012 threshold just announced means none of the repayments have gone towards repaying the post-2012 PGCE loan, repayments would then begin on that loan during the latter part of a teacher's career when earnings have reached their peak. As a pre-2012 loan holder, I was intending on taking a PGCE to qualify as a teacher in the near future, but these threshold changes and the impact it would have on my repayments have completely put me off which is perverse when there is a shortage of teachers.

3. Please confirm whether the division of repayment rules for borrowers with both pre-2012 and post-2012 will be changed/reviewed to make repayments fairer for these borrowers. It seems perverse that a threshold can be raised to benefit one set of borrowers enormously by taking a chunk of them out of repayment altogether while simultaneously dragging another set of borrowers into repayment for longer by applying a chunk of the repayment that would otherwise have been used to repay the post-2012 loan (at the higher interest rate) to the pre-2012 loan instead (which for the majority of these borrowers gets written off first). One small change that would dramatically improve the effectiveness and fairness for these borrowers would be to apply the full repayment above the pre-2012 threshold to the post-2012 loan first, or giving borrowers who took a PGCE the option of which loan to repay first (very similar to the 'PGCE option' given to borrowers who took a first degree under mortgage-style loans and then a PGCE under ICR loans).

The result of the latest changes to the post-2012 student loan repayment threshold means that there will bizarrely be 3 repayment thresholds all set at different arbitrary amounts and indexed in different ways (£18,330 for pre-2012 loans, £25,000 for post-2012 loans, £21,000 for postgraduate loans). This results in vastly different amounts repaid by lower earning borrowers depending on the loans they hold and there appears to be no good reason for this whatsoever given that £21,000 was spun out of the Browne review because it recognised that the continued freeze on the £15,000 threshold in force at the time was unfair. Yet borrowers who were subject to that extended freeze between 2005 and 2012 have had no benefit whatsoever from the subsequent corrective action proposed and in some cases have been left worse off because of those changes. How can this be justified?

Please release

Yours faithfully,

Dan Gibney

ACCOUNT, Unmonitored, Department for Education

Thank you for contacting the Department for Education. We can confirm that
we have received the Freedom of Information request you submitted.

We will respond to you within 20 working days.

 

ACCOUNT, Unmonitored, Department for Education

Dear Sir/Madam

Thank you for your recent enquiry. A reply will be sent to you as soon as possible. For information; the departmental standard for correspondence received is that responses should be sent within 20 working days as you are requesting information under the Freedom of Information Act 2000. Your correspondence has been allocated reference number 2017-0049385.

Thank you

Department for Education
Ministerial and Public Communications Division
Tel: 0370 000 2288

ACCOUNT, Unmonitored, Department for Education

1 Attachment

Dear Mr Gibney,

 

Thank you for your request for information, which was received on
10/10/2017 00:00 .

 

Please find attached an update to your request.

 

If you have any queries about this letter, please contact me. Please
remember to quote the reference number above in any future communications.

If you are unhappy with the way your request has been handled, you should
make a complaint to the Department by writing to me within two calendar
months of the date of this letter. Your complaint will be considered by an
independent review panel, who review panel, who were not involved in the
original consideration of your request. 

If you are not content with the outcome of your complaint to the
Department, you may then contact the Information Commissioner’s Office.

 Nilufa Rahman 

Web: [1]https://www.education.gov.uk
Twitter: [2]https://www.twitter.com/educationgovuk
Facebook: [3]https://www.facebook.com/educationgovuk

 

References

Visible links
1. https://www.education.gov.uk/
2. https://www.twitter.com/educationgovuk
3. https://www.facebook.com/educationgovuk

ACCOUNT, Unmonitored, Department for Education

2 Attachments

Dear Mr Gibney,

 

Thank you for your request for information, which was received on
10/10/2017 00:00.

 

Please find attached our response to your request.

If you have any queries about this letter, please contact me. Please
remember to quote the reference number above in any future communications.

If you are unhappy with the way your request has been handled, you should
make a complaint to the Department by writing to me within two calendar
months of the date of this letter. Your complaint will be considered by an
independent review panel, who review panel, who were not involved in the
original consideration of your request. 

If you are not content with the outcome of your complaint to the
Department, you may then contact the Information Commissioner’s Office.

 Nilufa Rahman 

Web: [1]https://www.education.gov.uk
Twitter: [2]https://www.twitter.com/educationgovuk
Facebook: [3]https://www.facebook.com/educationgovuk

 

References

Visible links
1. https://www.education.gov.uk/
2. https://www.twitter.com/educationgovuk
3. https://www.facebook.com/educationgovuk

Looking for an EU Authority?

You can request documents directly from EU Institutions at our sister site AskTheEU.org . Find out more .

AskTheEU.org