Tuition fee hike now active possibility amid university funding crisis – what it means for you
MILLIONS of university students face a massive blow as tuition fee hikes are now an active possibility.
Government officials have developed plans to raise tuition fees to prevent a financial crisis in universities, according to The i.
Universities and colleges charge tuition fees to cover the cost of your education.
For undergraduate courses, tuition fees are capped at £9,250 per year for UK and EU students studying at public universities in England.
However, fees have been frozen since 2017, and inflation has diminished the current cap’s real-term value.
As a result, the new Labour government is considering a full-scale review of the university funding system, which Education Secretary Bridget Phillipson previously called “broken”.
Sources have indicated that civil servants in the Department for Education have already proposed several options for Ms Phillipson, including increasing student fees.
It comes after she reiterated on Thursday that increasing fees would be “really unpalatable,” though she did not dismiss the possibility.
Research by the Institute for Fiscal Studies last month said that if the current cap is unfrozen in the next financial year, tuition fees could rise to £9,450.
By the end of the current term, the cap would stand at around £10,500 on current forecasts.
The Department for Education has been contacted for comment.
How do tuition fees work?
Tuition fees are usually covered by a tuition fee loan from Student Finance.
This loan is paid directly to the university or college on your behalf.
Repayments start from the first April after you finish or leave your course, but only if your income exceeds a certain threshold.
You repay 9% of your income above the repayment threshold.
This means that the majority or basic-rate taxpayers lose 37p for every £1 they earn above the threshold – 20p as income tax, 8p as national insurance and 9p for a student loan.
Your repayment threshold will vary depending on when you studied at University.
Interest is charged on your loan from the day you receive the first payment until it is repaid in full.
However, it’s important to note that any remaining debt can be written off after a set number of years, even if you haven’t repaid the total amount.
How have student loan repayments changed?
STUDENT loan repayments are based on your earnings and not the size of the debt.
However, when you start making repayments or when your student loan amount is written off will depend on when you went to University.
Plan 1 – 1998-2012
If you took out a student loan between 1998 and 2012, you’ll be bound by the Plan 1 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £24,990 a year.
You’ll pay 9% back once your salary breaches this threshold.
The interest rate charged on these loans is based on either RPI or the Bank of England rate – whichever is lower – plus one percentage point.
These loans are written off after 25 years.
Plan 2 – 2012-2023
If you took out a student loan between 1998 and 2012, you’ll be bound by the Plan 2 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £27,295 a year.
You’ll pay 9% back once your salary breaches this threshold.
The interest rate charged on these loans is based on RPI plus up to three percentage points – dependant on your income.
These loans are written off after 30 years.
Plan 5 – 2023-present
If you took out a student loan from 2023 onwards, you’ll be bound by the Plan 5 repayment rules.
These students only start repaying their loans when their salary breaches the threshold of £25,000 a year.
You’ll pay 9% back once your salary breaches this threshold.
The interest rate charged on these loans is based on RPI only.
These loans are written off after 40 years.
What about maintenance loans?
In addition to tuition fee loans, students can also receive a maintenance loan worth up to £13,348 to help with everyday living costs.
Like a tuition fee loan, maintenance loans must be repaid following the same repayment rules outlined above.
It’s understood that ministers are exploring potential policies, including reinstating maintenance grants for students from low-income families.
However, nothing has been confirmed as of yet.
A maintenance loan is paid directly into your bank account at the beginning of each term.
This means typically you’ll receive three payments a year.
The loan is meant to cover your living costs during your studies and most people use it to help pay for rent.
You won’t need to use this money on your tuition because that is paid for separately.
However, your household income during the application process could affect how much you’re entitled to.
For example, depending on household income, those living at home can get a maintenance loan worth between £3,790 and £8,610.
If you’re living away from home and not in London, you could receive a total of between £4,767 and £10,227.
And if you’re living away from home and in London, you could be eligible for a maintenance loan between £6,647 and £13,348.
Check for student loan overpayments
MILLIONS of people who went to university have overpaid their student loan and could be due money back.
It’s not just recent graduates affected, and many could now be in their 30s and 40s.
You’re only supposed to start paying back your loan once you earn above a certain amount.
This amount depends on when you started your course, and thresholds have increased over the years as average salaries have risen.
However, many graduates have been caught out repaying loans even though their earnings weren’t high enough.
Repayments are automatically taken through work payroll systems – usually when monthly income suggests that yearly salary will be over the threshold.
But if you earn more in a month – because of bonuses, overtime or irregular hours – it can wrongly trigger repayments.
Other system errors might also have meant you overpaid.
You shouldn’t have any payments taken until April after you’ve graduated, even if you’re over the earnings threshold, but mistakes can occur.
You might also have been put on the wrong loan repayment plan or had money deducted after you’ve paid off your loan.
Dig out your payslips to check if you’re owed a refund on some of your student loan repayments.
Then, check your total annual income and look at when your loan repayments started in case they began too soon.
You can also cross-check this information with your paper statements from the Student Loan Company online.
If you’re due a refund, you can complete an online request form on the government website.
Find out more by visiting www.gov.uk/repaying-your-student-loan/getting-a-refund.