The government is consulting on whether students should be charged for overpaying their student debt. So, those who make early repayments, or who earn more, could pay extra for the privilege. How can this be fair?
With tuition fees set to rise up to £9,000, the relationship between students and universities has changed to one where students can – and should – expect value for money.
At the same time, many more will have to rely on student loans to finance their degree. So to levy a fee on overpaying your debt is, quite frankly, adding insult to injury.
Is this really a progressive system?
The main argument behind charging students for overpaying on their loan is that students on higher incomes would be able to escape the costs of the system earlier. By discouraging early repayments, the government wants to share the burden more evenly between all student borrowers.
The levy would apply once a graduate earns above a certain threshold (eg. £41,000) or repays more than a threshold annual amount (e.g. £3,000).
My concern is that those who overpay on their student debt are not necessarily those on high incomes, though. Some people prefer to overpay simply because they want to be debt-free as soon as possible. This is a personal choice of prioritising debt reduction over spending. Even so, why should people be punished for taking on a job that pays them a good salary?
Most importantly, those who can afford to pay for university up-front will never be part of this system and will therefore never contribute to the cost of student lending. So I can’t see how this is a truly progressive system.
Don’t send students the wrong signal
If there’s one lesson I think people should learn from the recent financial crisis, it is that inane spending is not the way forward.
Instead, it’s important that people learn to be financially responsible, getting rid of debt and saving for the long-term. This is particularly important for young people who face unprecedented costs, not just in education, but also in housing and pension provision.
For many people, a student loan is their first experience of taking on a large debt. Surely, we should make this a positive experience? By imposing charges on overpaying, the government is sending the wrong signal. Instead of encouraging less debt, this system will make debt a permanent feature of some people’s adult lives.
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