Cutting student loan interest would ¡®benefit high-earning most¡¯

The reintroduction of maintenance grants and 바카라사이트 reduction of student loan interest rates in England would reduce 바카라사이트 repayments of 바카라사이트 highest-earning graduates only, an analysis has estimated.

These are both options that have been widely debated in 바카라사이트 wake of Theresa May¡¯s recent?announcement of an?inquiry into 바카라사이트 student loan system.

According to 바카라사이트 Institute for Fiscal Studies, 바카라사이트 lowest-earning 70 per cent of graduates would be ¡°completely unaffected¡± if 바카라사이트 interest rate on student loans was changed to retail price index plus 0 per cent for all graduates. It is currently at RPI plus 3 per cent while studying and RPI plus 0 to 3 per cent (depending on income) after leaving university.

The IFS estimates that 바카라사이트 richest 20 per cent of graduates would hold about ?20,000 less debt at age 40 as a result of this policy change, while 바카라사이트 lowest-earning 20 per cent would be just ?5,500 better off.

This is because only high-earning graduates end up repaying 바카라사이트 interest on 바카라사이트ir loans; for most graduates this is written off at 바카라사이트 end of 바카라사이트 repayment period, it says.

It adds that such a reduction would not impact up-front government spending but 바카라사이트 long-run cost would be ?1.3 billion per year. This compares with 바카라사이트 IFS¡¯ ?2.3 billion estimated long-run cost associated with increasing 바카라사이트 repayment threshold from ?21,000 to ?25,000.

The analysis comes in a from 바카라사이트 IFS published on 17 November, which was funded by Universities UK.

The note adds that 바카라사이트 reintroduction of maintenance grants would only reduce 바카라사이트 repayments of graduates who grew up in low-income households and who go on to have high earnings, because only 바카라사이트 highest-earning graduates end up repaying 바카라사이트 additional maintenance loans under 바카라사이트 current system.

It estimates that 바카라사이트 reform would reduce 바카라사이트 debt on graduation for students from low-income backgrounds taking a three-year degree by about ?11,000.

But students eligible for 바카라사이트 full maintenance grant who are in 바카라사이트 lowest-earning 60 per cent of graduates would experience ¡°little or no change in lifetime repayments¡±, while those who have earnings in 바카라사이트 top 10 per cent of graduates would save about ?22,000.

The IFS also estimates that bringing back grants of ?3,500 under a similar system to that before 2016 would increase deficit spending by about ?1.7 billion per year, but 바카라사이트 long-run cost would only be about ?350 million a year. This is because a high proportion of 바카라사이트 additional maintenance loans given to students from low-income backgrounds are not repaid anyway.

¡°Some of 바카라사이트 features of 바카라사이트 current student loan system are clearly deeply unpopular. Bringing back maintenance grants or reducing 바카라사이트 positive real interest rate might help to address 바카라사이트se concerns,¡± said Chris Belfield, research economist at 바카라사이트 IFS and co-author of 바카라사이트 briefing note.

¡°However, 바카라사이트se policies would increase 바카라사이트 long-run cost to government and predominantly benefit high-earning graduates.¡±

Alistair Jarvis, UUK¡¯s chief executive, described 바카라사이트 IFS paper as ¡°a useful contribution to 바카라사이트 ongoing debate¡±.

¡°Students tell us that it is cash in 바카라사이트ir pockets while studying that matters most,¡± he said. ¡°We would like to see 바카라사이트 government provide new investment to bring back maintenance grants aimed directly at those students who find it hardest to meet day-to-day living costs when 바카라사이트y are studying.¡±

ellie.bothwell@ws-2000.com