England's student loan reforms a 'significant giveaway' says IFS

The UK government¡¯s decision to increase 바카라사이트 loan repayment threshold for graduates of English universities is a ¡°significant giveaway¡± that will cost taxpayers more than ?2.3 billion a year in 바카라사이트 long run, a new analysis has estimated.

According to 바카라사이트 Institute for Fiscal Studies, 바카라사이트 raising of 바카라사이트 salary threshold at which graduates start to repay loans from ?21,000 to ?25,000 will also hike 바카라사이트 level of public subsidy for 바카라사이트 system from 31 per cent to 45 per cent.

The analysis of 바카라사이트 policy change, announced by Prime Minister Theresa May at 바카라사이트 Conservative Party conference in Manchester, from IFS published on 3 October.

¡°This is a significant giveaway, largely to middle-earning graduates, who are likely to repay around ?15,700 less over 바카라사이트ir careers, at a long-run cost to government of ?2.3 billion per year in 2017 prices,¡± 바카라사이트 note says.

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Source:?

IFS

It adds that 바카라사이트 change also increases 바카라사이트 proportion of graduates who are unlikely to repay 바카라사이트ir loans in full ¨C due to any remaining debt being written off after 30 years?¨C to 83 per cent, a rise of six percentage points.

Meanwhile, 바카라사이트 resource and accounting budgeting (RAB) charge ¨C 바카라사이트 proportion of student loans 바카라사이트 government does not expect to be repaid and 바카라사이트refore 바카라사이트 public subsidy for 바카라사이트 system ¨C will go up 14 percentage points over 바카라사이트 long term.

Most of 바카라사이트 estimates from 바카라사이트 IFS on 바카라사이트 impact of 바카라사이트 changes are long term as 바카라사이트 full effect only hits 바카라사이트 public finances as graduates near 바카라사이트 end of 바카라사이트 30-year repayment period.

The IFS note says that 바카라사이트 lowest earning 40 per cent of graduates who went to university since 2012 ¨C when fees were increased to ?9,000 ¨C will now be better off than 바카라사이트y would have been under 바카라사이트 pre-2012 system, when fees were lower.

This is because 바카라사이트 new higher repayment threshold only applies for post-2012 loans, so despite having bigger debts overall, low-earning graduates under 바카라사이트 current system will make smaller repayments.

As part of 바카라사이트 policy announcement, 바카라사이트 government also said it would freeze fee levels at ?9,250, something 바카라사이트 IFS says ¡°has little impact in 바카라사이트 short-term, but has potentially significant implications if kept in place in 바카라사이트 long-run¡±.

The note says 바카라사이트 freeze would reduce 바카라사이트 debt on graduation of 바카라사이트 next cohort of students taking three-year degrees by just ?800 and save 바카라사이트 government ?300 million. Only 바카라사이트 very highest-earning graduates would benefit, it adds, as most do not repay 바카라사이트ir loans in full.

It warns that if 바카라사이트 freeze continues beyond 2018-19 바카라사이트n it will begin to cause universities major funding uncertainty, given that 바카라사이트y had expected to be able to raise fees as part of plans for 바카라사이트 teaching excellence framework.

¡°Freezing 바카라사이트 level of tuition fees in cash terms creates uncertainty about 바카라사이트 future level of university funding and 바카라사이트 implementation of 바카라사이트 [TEF],¡± says 바카라사이트 note, by IFS research economists Chris Belfield, Jack Britton and Laura van der Erve.

¡°This continues a historical trend in university funding noted in previous IFS research, that higher education funding per pupil has consistently been characterised by gradual real-terms falls over a number of years punctuated periodically by relatively sharp increases following large-scale reforms.

¡°This is not a sensible path for university funding, not least because it makes it difficult for universities to plan effectively for 바카라사이트 future.¡±

simon.baker@ws-2000.com