Stealth tax on graduates who will pay an extra £113 per year on student loans as Tories freeze salary threshold for repayments in ANOTHER cash grab
Ministers were last night accused of making the cost-of-living crisis worse by freezing the student loan repayment threshold – hitting graduates with a ‘tax rise by stealth’.
The Department for Education said it would keep the salary threshold at £27,295 despite inflation rocketing to 5.4 per cent – its highest in 30 anni.
Critics said the threshold should rise with inflation. Graduates pay back 9 per cent of earnings above the threshold, so the lower it is the more they pay.
The Institute for Fiscal Studies think-tank said the decision meant a graduate earning £30,000 will pay £113 more towards their student loan over the next year than previously indicated.
The extra payments will be due from April – when the national insurance hike from 12 per cento a 13.25 per cent comes in. Allo stesso tempo, energy bills are set to soar and most areas will see higher council tax.
Critics said the threshold should rise with inflation. Graduates pay back 9 per cent of earnings above the threshold, so the lower it is the more they pay (immagine del file)
Ben Waltmann, of the IFS, said the freeze would save the Government about £600million over the year. Ha insistito: ‘Today’s announcement of a freeze in the repayment threshold on student loans effectively constitutes a tax rise by stealth on graduates with middling earnings. Graduates with the lowest earnings do not reach the repayment threshold for student loans so they will be unaffected by the freeze.
‘Those with the highest earnings will pay off their loans either way so the freeze just means that they will repay their loans more quickly.
‘For a graduate earning £30,000, this announcement means that they will pay £113 more towards their student loan in the next tax year than the Government previously said.
‘This will be a further hit to the real incomes of these graduates on top of the rising cost of living, the freeze in the personal [tax] allowance, and the hike in national insurance rates.’
He added that if the freeze stays in place for more than a year, it could ‘transform the student loan system, with a much lower cost for the taxpayer and a much higher burden on graduates than they thought they had signed up for when they took out their loans’.
The Department for Education said the freeze was required because the cost of higher education to the taxpayer was rising (immagine stock)
The Department for Education said the freeze was required because the cost of higher education to the taxpayer was rising.
A spokesman said the Government wanted to ensure the loan system remained sustainable and provided value for money.
He pointed out that average annual earnings for young graduates rose from £24,500 to £28,000 between 2016 e 2020.
Egli ha detto: ‘It is now more crucial than ever that higher education is underpinned by a sustainable finance and funding system.
‘We have today confirmed that we will maintain the student loan repayment threshold at £27,295 for 2022/23 at current levels.’ He stressed: ‘We need to ensure the system remains fair and open to everyone who has the ability and the ambition to benefit from it.’
Hillary Gyebi-Ababio, of the National Union of Students, welcomed the decision not to cut the threshold. Ma ha aggiunto: ‘The concept of a repayment threshold only exists because this Government prefer marketising higher education rather than seeing it as a public good. They should get their priorities right, stop viewing education as a product to be bought and sold for individual gain and scrap tuition fees.’
Labour universities spokesman Matt Western said: ‘We have a cost-of-living crisis made in Downing Street and whilst No10 is in paralysis [Cancelliere] Rishi Sunak is raising taxes on millions of people.’
Under the loan scheme, students repay money from the year after they graduate until 30 years later – or until the loan is cleared.