OBR says ministers will get extra £10billion from student loan changes

Financial watchdog the OBR says ministers will rake in an extra £10billion from changes to student loans that force graduates to start repaying them sooner and for longer

  • Repayments begin when salary hits £25,000, instead of current the £27,295
  • Maximum time that it can be repaid before written off up from 30 aan 40 jare
  • Raises the prospect of some repaying their debts when aged in their 50s
  • Ministers are set to rake in an extra £10billion from graduates after making changes to student loan repayments, the financial watchdog said today.

    Under plans unveiled last month former students will have to begin repayments when their salary hits £25,000, instead of the current £27,295 figure.

    Op dieselfde tyd, the length of time over which graduates have to keep paying back money they have borrowed before the balance is written off is likely to be increased to 40 jare, from the current 30.

    It raises the prospect of some future students still repaying their debts when they are aged in their 50s.

    In its analysis of Rishi Sunak’s spring statement today the Office for Budget Responsibility said the changes represented ‘the largest fiscal takeaway’. It added that the move would ‘reduce borrowing for the Government in every year of the forecast, but for affected students the costs will be borne over a period of decades’.

    Dit het bygevoeg: ‘As borrowerslifetime repayments increase and the total owed decreases, … the value to the Government of existing loans also improves (by £10.6 billion, thanks largely to lowering the repayment threshold).’

    In its analysis of Rishi Sunak's spring statement today the Office for Budget Responsibility said the changes represented 'the largest fiscal takeaway'.

    In its analysis of Rishi Sunak’s spring statement today the Office for Budget Responsibility said the changes represented ‘the largest fiscal takeaway’.

    It added that the move would 'reduce borrowing for the Government in every year of the forecast, but for affected students the costs will be borne over a period of decades'.

    It added that the move would ‘reduce borrowing for the Government in every year of the forecast, but for affected students the costs will be borne over a period of decades’.

    t added: 'As borrowers' lifetime repayments increase and the total owed decreases, ... the value to the Government of existing loans also improves (by £10.6 billion, thanks largely to lowering the repayment threshold).

    t added: ‘As borrowerslifetime repayments increase and the total owed decreases, … the value to the Government of existing loans also improves (by £10.6 billion, thanks largely to lowering the repayment threshold).

    The Institute for Fiscal Studies (IFS) previously warned that changes to student loan repayments announced in February would hit lower-earning graduates hardest.

    Ben Waltmann, senior research economist at the IFS, said changes which will see graduates start paying their loan back over a salary threshold of £25,000 from September 2023 would benefit high-earning graduates, while increasing the cost for lower earners.

    It later updated its analysis to show the impact of the changes on lower-earning graduates was set to be even higher, owing to a ‘crucial tweakin the policy’s supporting documents.

    The IFS previously estimated that those on lower incomes would pay £19,000 more towards their student loan across their lifetime, but it now believes those in the third and fourth earnings decile – those on lower middle incomes – will pay back £28,000 more.

    This is because while the repayment threshold will be frozen at £25,000 until 2026/27, it will then be indexed to the inflation rate rather than average earnings.

    Reforms to the way inflation is calculated mean the retail price index will be brought into line with the CPIH, a consumer price index that includes housing costs.

    The IFS said that according to Office for Budget Responsibility forecasts, this will mean the repayment threshold of £25,000 will rise by around 1.7 percentage points less each year than it would have done.