Question to the Department for Education:

To ask the Secretary of State for Education, what assessment she has made of the potential impact of effective marginal deduction rates exceeding 50 per cent on Plan 2 student loan borrowers’ labour supply, including decisions on a) overtime, b) hours worked and c) promotions.

Plan 2 loans were designed and implemented by the previous government and, given the inherited fiscal situation, the department is making tough but necessary decisions.

Graduates only begin repaying their student loan once earnings exceed the earnings threshold, after which they pay 9% of income above that level. At the end of the tax year, a borrower with total earnings below the annual student loan repayment threshold, may reclaim any repayments made where a pay period threshold was exceeded.

If earnings fall below the repayment threshold, borrowers are not required to make repayments, regardless of their plan. Any outstanding loan, including interest accrued, will be cancelled after the loan term ends, and debt is never passed on to family members or descendants.