Students: Debts

(asked on 27th February 2023) - View Source

Question to the Department for Education:

To ask the Secretary of State for Education, if she will make an assessment of the potential merits of a debt forgiveness programme for students who were financially affected by covid.

Answered by
Robert Halfon Portrait
Robert Halfon
This question was answered on 7th March 2023

Throughout the COVID-19 pandemic, the government was clear that universities were expected to maintain academic standards and the quantity of tuition should not drop. All universities were expected to continue to deliver excellent learning, in line with guidance from the Office for Students, to provide students with a full experience.

The tuition fee and student loan system in England is designed to be sustainable, fair to students and taxpayers, while ensuring that those who benefit financially from higher education make a fair contribution towards its cost.

Borrowers are only liable to repay after leaving study when earning over the relevant repayment threshold. The student finance system continues to protect lower earners and borrowers who experience a reduction in their income. Repayments are calculated as a fixed percentage of earnings above the relevant repayment threshold (£27,295 for a post-2012 undergraduate plan and £21,000 for a post graduate loan), and do not change as a result of interest rate charges or the amount borrowed. If a borrower’s income drops, so does the amount they repay. If income is below the relevant repayment threshold, or a borrower is not earning, then they do not have to make repayments at all. Any outstanding debt, including interest accrued, is written off after the loan term ends (or in the case of death or disability), at no detriment to the borrower.

To further protect borrowers, the government, by law, must cap maximum student loan rates to ensure the interest rate charged on the loan is in line with market rates for comparable unsecured personal loans. On 8 February 2023, the Student Loan Company announced that the interest on Plan 2 and Plan 3 student loan repayments will be capped to 6.9% from 1 March 2023. Without this cap, student loan borrowers may have faced interest rates between 9 to 12%.

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