Students forced to borrow tens of thousands of pounds to pay tuition fees should think of the money as a tax rather than ‘debt around their necks’, the universities minister said yesterday.
David Willetts said youngsters put off going to university by fees of up to £9,000 a year were wrong to think of student loans as being like credit-card debt because they would not have to repay any money until they earned above £21,000.
Figures show university applications are down 12 per cent on this time last year.
Sally Hunt, general secretary of the University and College Union, said: ‘If the minister is insistent on calling this a tax, he should call it a tax on learning and ambition.’
Sally Hunt, general secretary of the University and College Union, said: ‘From next year England will be the most expensive place in world in which to study at a public university.
‘Mr Willetts’ comments are a blatant attempt to try and find an acceptable name for fleecing students and the state abdicating its responsibilities for our young people.
‘If the minister is insistent on calling this a tax then he should call it a tax on learning and ambition.’
Meanwhile, there are widespread fears that those who are saddled with the increased debt will later struggle, or find it impossible, to afford the monthly repayments for a mortgage or pension, or both, alongside the loan repayments.
HOW THE FIGURES BREAK DOWN
For a three year course a student will pay £27,000 on tuition fees of up to £9,000 a year.
Away from London a maximum loan of £5,500 is available compared with £6,750 in the capital making the possible amount paid back in maintenance loans £20,250.
The total, therefore is £47,250, but over the 30 year life of the debt it would quickly accumulate to £70,000, or possibly even more.
Students starting a degree in 2012 are expected to graduate with total debt (taking into account accommodation and living costs) of around £70,000. This compares to the current £29,000, with fees of £3,275.
Once their earnings reach the £21,000 threshold, they will start repaying 9per cent of their earnings.
They will be repaying a commercial rate of interest – RPI plus 3 per cent – which is greater than some High Street banks offer. As a result many will end up paying back £70,000.
Under the current system, repayments kick in once an annual income of £15,000 is reached.
In addition, the fees will be written off after 30 years – five years later than under the current system.
Mr Willetts has admitted many low earners will be unable to repay the full amount. He is also considering a mechanism to allow the very wealthiest to repay the full amount in one lump sum, avoiding hefty interest charges.
The combination of this is that the middle class, with earnings of around £25,000, will bear the brunt – they will pay more interest and they will pay for longer.
Mr Willetts, the architect of the new tuition fees system, was staunch in his defence of the £70,000 ‘loan’, despite belonging to a Government frequently warning about the irresponsibility of debt.
He said: ‘We’re trapped in this language of debt. It’s not like leaving with £25,000 on your credit card or something. If someone said your child was leaving university with £25,000 on a credit card, you’d be quite rightly horrified.
‘If someone said they’re leaving university and during their working lives they’re going to pay half a million pounds of income tax, you’d be completely relaxed.
‘And our graduate repayment scheme is closer to – it’s not exactly the same – but it’s closer to the income tax end of the scale than the credit card end of the scale.
‘It’s a graduate repayment scheme that has many of the features of income tax. It’s not like some debt around their necks.’
Mr Willetts said that teens should not be ‘frightened’ at the prospect of repaying £70,000.