Students and graduates who have taken out student loans since 2012 will face higher repayments after the £21,000 income threshold at which borrowings must be paid back was frozen for five years.

The controversial change – omitted from the chancellor’s spending review speech in the Commons on Wednesday – means that on average a former student will pay £306 a year more in 2020-21 compared with 2016-17.



When the 2012 student loan system was launched, the government pledged that from April 2017, the £21,000 figure would be raised each year in line with average earnings. It now intends to freeze this threshold at £21,000 until April 2021 at the earliest, despite strong opposition in a recent consultation.



“This increases the financial commitment of borrowers to repaying their loans,” the post-consultation report from the Department for Business, Innovation and Skills (BIS) said, announcing the freeze. “In 2020-21 borrowers will be paying £6 per week, or £306 in the year, more than they will be in 2016-17.

“What this means is that graduates would end up paying more each month than the loan scheme previously promised and publicised when students took out the loan,” Sorana Vieru, NUS vice-president for higher education, said. “This is yet another betrayal by the government and part of a long list of political measures that shows complete disdain to students and their futures.”

Martin Lewis, founder of MoneySavingExpert who chaired the independent taskforce on student finance information, accused the chancellor of not “having the balls to talk about this in the speech and I’m absolutely spitting teeth over this right now”.

“This is a retrospective change to student loans, millions of people across the country will have to pay more each month,” he told LBC. “This is a change going backwards, it’s a change from what they said they would have done when people started going to university.

“It’s an absolute disgrace that breaks the fundamental bond of politics that you do not impose retrospective changes. Commercial companies would not have been allowed to do this. This was snuck in the back door, even though he mentioned student loans in the speech.”

The business department said it hoped the freeze would increase repayments by £3.2bn over the lifetime of the loans of existing borrowers.



Labour MP Wes Streeting, the former NUS president who worked with Lewis on the taskforce, said the move “completely changed the financial conditions, retrospectively, that students signed up to in good faith”.

“How can students now trust anything the government says about student loans they sign up to? If banks did this to customers, there would be an enormous outcry. This change will hit hardest those graduates on low and middle incomes close to the earnings threshold.”

A spokesman for the department said the change has been made to reflect the reality of graduate earnings, which he said hadn’t risen as high as they were expected to. “When the £21,000 threshold was set in 2010, assumptions had to be made about earnings growth between 2010 and 2016,” the spokesman said.

“While the economic recovery is underway, it is not yet fully reflected in earnings, so the threshold is higher in real terms than originally intended.

“Making this change helps contribute to the current government’s debt reduction targets.”