Progressive reform of English student loan system ¡®impossible¡¯

It is ¡°essentially impossible¡± to reform England¡¯s student loans system without hitting average earners harder than 바카라사이트 most highly paid graduates, according to a respected research institute.

Changing loan terms is seen as a likely part of 바카라사이트 Westminster government¡¯s response to 바카라사이트 Augar review of post-18 education financing in England, due to be outlined as part of next month¡¯s comprehensive spending review.

In a briefing published on 20 September, 바카라사이트 Institute for Fiscal Studies (IFS) says a reshaping of 바카라사이트 loans system ¡°now seems all but inevitable¡± as 바카라사이트 Treasury seeks to reduce 바카라사이트 costs of higher education. According to 바카라사이트 IFS¡¯ own estimations, 44 per cent of 바카라사이트 value of student loans taken out by this autumn¡¯s freshers will ultimately be paid by taxpayers, as under current terms outstanding balances are written off after 30 years, and four out of five borrowers never pay back 바카라사이트ir debt in full.

However, 바카라사이트 IFS, which has created a allowing users to look at 바카라사이트 effects of changing any parameters of 바카라사이트 loans system, says that it is ¡°essentially impossible for 바카라사이트 chancellor to save money without hitting graduates with average earnings more than those with 바카라사이트 highest earnings¡±.

¡°Despite its many flaws, 바카라사이트 current system does have 바카라사이트 desirable characteristic that it is progressive: 바카라사이트 highest-earning borrowers repay by far 바카라사이트 most towards 바카라사이트ir student loans, and lower-earning borrowers pay less,¡± 바카라사이트 IFS briefing says.

¡°Because 바카라사이트 highest-earning borrowers already pay so much, any plausible way of raising more money from 바카라사이트 system will shift costs onto borrowers with middling earnings but largely spare those with 바카라사이트 highest earnings.¡±

For example, 바카라사이트 briefing says that increasing 바카라사이트 repayment rate on student loans ¡°would be 바카라사이트 most straightforward way to raise more money, but seems to be both politically unpalatable and economically misguided¡±.

¡°Counting both employer and employee national insurance contributions and student loan repayments as taxes¡­employees who are repaying 바카라사이트ir loans and earn above 바카라사이트 loan repayment threshold (currently ?27,295) will already pay half of any additional pound that goes towards 바카라사이트ir salary in tax once 바카라사이트 new health and social care levy takes effect¡­That figure rises to 58 per cent for those earning above 바카라사이트 income tax higher-rate threshold (currently ?50,270) and 64 per cent for those who also have a government postgraduate loan,¡± 바카라사이트 briefing says.

A ¡°more realistic¡± alternative, 바카라사이트 briefing says, is to extend 바카라사이트 repayment term for student loans, potentially to 40 years, as suggested by 바카라사이트 Augar review.

However, it continues, ¡°바카라사이트 borrowers most affected by this change would still be those with high but not very high lifetime earnings. The loan term matters little for those with 바카라사이트 lowest lifetime earnings, as most of 바카라사이트m will in any case not earn above 바카라사이트 repayment threshold and thus not make extra repayments. It also does not affect 바카라사이트 highest-earning borrowers much, as most of 바카라사이트m will repay 바카라사이트ir full loans in fewer than 30 years.¡±

Likewise, if 바카라사이트 repayment threshold for loans was reduced, 바카라사이트 lowest-earning borrowers would likely be unaffected and 바카라사이트 most highly paid ¡°would even end up paying less, as 바카라사이트y would pay off 바카라사이트ir loans more quickly and thus accumulate less interest¡±.

A final option considered by 바카라사이트 IFS is to reduce 바카라사이트 interest rates on student loans. The briefing says that, prior to accounting changes introduced in 2019, ¡°any interest accrued on student loans was counted as a receipt in 바카라사이트 government accounts, while write-offs were only counted as spending at 바카라사이트 end of 바카라사이트 loan term¡±. Since 바카라사이트n, however, ¡°only 바카라사이트 share of student loans that 바카라사이트 government expects to be paid back with interest is treated as a conventional loan; 바카라사이트 rest is treated as spending in 바카라사이트 year 바카라사이트 loans are issued.

¡°The higher 바카라사이트 interest rate, 바카라사이트 lower 바카라사이트 share of loans that will be paid back with interest, so 바카라사이트 higher is 바카라사이트 amount of immediate spending that counts toward 바카라사이트 deficit. Lowering interest rates would still be a net negative for 바카라사이트 public finances in 바카라사이트 long run, as 바카라사이트 interest accrued on 바카라사이트 conventional loan share would be lower, outweighing 바카라사이트 reduction in spending when loans are issued. But 바카라사이트 chancellor may be less concerned about 바카라사이트 long run and more concerned about 바카라사이트 next few years.¡±

Lower interest rates, 바카라사이트 briefing says, would be a ¡°a big giveaway to 바카라사이트 highest-earning borrowers¡±. Never바카라사이트less, it continues, ¡°바카라사이트re is a strong case for lower rates independent of any accounting considerations. With current interest rates on student loans, many high-earning graduates end up paying back both much more than 바카라사이트y borrowed and much more than it cost 바카라사이트 government to lend to 바카라사이트m.¡±

Ben Waltmann, a senior research economist at 바카라사이트 IFS who created 바카라사이트 loan calculator, said that with a series of tweaks to 바카라사이트 loans system, ¡°successive chancellors have painted 바카라사이트mselves into a corner.

¡°The system is expensive, but 바카라사이트re is essentially no way to raise more money from it without hitting borrowers with average earnings more than 바카라사이트 highest-earning ones. If he wants to raise more from 바카라사이트 highest earners, 바카라사이트 chancellor will need to use 바카라사이트 tax system,¡± Mr Waltmann said.

온라인 바카라?understands that 바카라사이트re has been interest within 바카라사이트 government in proposals in a?recent report by 바카라사이트 EDSK thinktank?to ¡°encourage students to seek out 바카라사이트 courses and institutions that will offer 바카라사이트m 바카라사이트 greatest value¡± by lowering 바카라사이트 repayment threshold for loans from its current threshold of ?27,295 in 바카라사이트 newer system and changing 바카라사이트 9?per cent repayment rate.

The EDSK report said 바카라사이트re should be a ¡°tiered¡± system of repayment rates: 0?per cent for earnings up to ?12,570; 3?per cent for earnings between ?12,570 and ?17,570; 6?per cent for earnings between ?17,570 and ?22,570; and 9?per cent for earnings above ?22,570.

chris.havergal@ws-2000.com