Government reveals higher learning tax for lowest paid students
10 February 2012
Lowest earning students will pay back more than double what they borrow under new college fee regime
Students aged over 24 who go on to earn less than the national average salary will be expected to pay back £20,500 on a £10,000 loan to pay for their course at a further education college, according to the government's own financial modelling.
The startling government figures reveal that it will be the lowest paid students who will be penalised the most for studying at college. Under the new regime, the more a student goes on to earn the less they will repay.
A student who goes on to earn £25,000 after leaving college (£1,200 less than the current national average full-time annual salary) will pay back £20,500. A student who earns £30,000 will pay back £15,700 and one picking up a salary of £35,000 will pay back £14,600 in total.
| Earnings | Amount borrowed | Total repaid over 30 years | Total repaid as % of original loan |
| £21,000 | £10,000 | £0 | 0 |
| £25,000 | £10,000 | £20,500 | 205% |
| £30,000 | £10,000 | £15,700 | 157% |
| £35,000 | £10,000 | £14,600 | 146% |
From 2013, people over the age of 24 wishing to study a level 3 qualification (equivalent to apprenticeships and A-levels) and above will have to pay fees of up to £4,000 a year and take out a government-backed loan to fund the course. The figures were revealed in a Parliamentary answer from the minister for further education, John Hayes, to his shadow, Gordon Marsden, on Tuesday.
UCU general secretary, Sally Hunt, said: 'These plans replicate the worst elements of the government's tuition fee changes in universities and will be unfair for college students. People who earn lower wages after funding a college course will be the ones paying the most back.
'It does not seem right that somebody who goes on to earn less than the national average salary is stung with a learning tax of more than twice the amount they borrowed. At a time when we have record numbers of people unemployed we need to look at ways to help people back into education.
'The last thing we should be doing is putting up huge financial barriers with such clearly unjust repayment packages.
The full Parliamentary answer:
Mr Marsden: To ask the Secretary of State for Business, Innovation and Skills what estimate he has made of the total amount of further education (FE) loans and interest on those loans a FE student will repay if they take out the maximum available FE student loan in 2013-14 and earn (a) £21,000, (b) £25,000, (c) £30,000 and (d) £35,000 per year until the loan is repaid. [94233]
Mr Hayes: There is no specified maximum amount of FE loan. Rather, learners will be able to take out a loan up to the value of the fully funded rate paid to their learning provider for the course they choose. In 2012/13, the course with the highest fully funded rate is expected to be around £10,000 (Engineering Apprenticeship), so we have assumed this is the amount borrowed. We have assumed that the learner starts the course in 2013/14, the course will last two years, and he or she will begin repayment in 2018 (to make the results comparable with question 94234 tabled by the hon. Member where repayment starts in 2018).
We have assumed that the requested income scenarios are given in 2016 terms; that the incomes increase with general earnings growth beyond that year; and that the learner remains in full-time employment for the whole of the 30 year period. On that basis, the total amounts borrowed, the total repayments over the repayment period of 30 years, and the total gross earnings for that period would be as shown in the following table:
| £ | |||
| Initial earnings | Amount borrowed | Total amount repaid over 30 years (nominal) | Total income over 30 years (nominal) |
| £21,000 | 10,000 | 0 | 1,441,600 |
| £25,000 | 10,000 | 20,500 | 1,716,200 |
| £30,000 | 10,000 | 15,700 | 2,059,500 |
| £35,000 | 10,000 | 14,600 | 2,402,700 |
7 Feb 2012 : Column 250W
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