News: Student ‘loans’ to be replaced by grants

News: Student ‘loans’ to be replaced by grants

author: Emily

By Emily


After 20 years, a new report has announced the end of the current student loan system. Read on to see how this could affect you.

Today, a new report has introduced changes to the way students will pay off their tuition fees. We explain what they could mean for you.

What’s this story about?

Students currently repay their student ‘debt’ through a ‘loan’ system. Money saving expert Martin Lewis has campaigned to change the way we talk about student fees, as he believes it creates confusion around how the repayment system works.

He has met with politician Philip Augar to push for fairness and better communication from the government. As a result, a new report (called the Augar report) has been released, proposing changes to the way students repay their tuition fees.

How does this affect you?

In a nutshell, the changes include:

Parental contribution will be made clear

In other words, if your kids are starting university, you’ll see exactly how much you’ll be expected to pay to support them.

Previously, it wasn’t made clear that parents had to contribute at all. If you have a higher household income, your child’s grant would be lower – as it’d be expected that you’d contribute more to support them. Now it’ll clearly show what you owe as parents, which could avoid any confusion or difficulty.

Loans renamed as ‘Student contribution’

The term ‘loan’ has often led to confusion, as many students believe they need to clear their debt as a priority when they leave university.

In reality, what students repay will depend entirely on how much they earn. Currently, graduates who earn over £25,725 will contribute 9% of their salary for up to 30 years. Then, the ‘debt’ is wiped away if it hasn’t been paid off within that time.

Renaming student loans as ‘contributions’ will help to reduce any confusion and will better reflect the repayment system.

Timeframe extended to 40 years

The Augar report has proposed that student ‘debt’ will be wiped away after 40 years instead of 30.

This means that students will likely end up repaying more of the total cost of the loan, although it’s still predicted that only 1 in 5 will manage to clear the total cost before they reach the age of fifty.

Tuition fees could be dropped to £7,500

The maximum yearly fee of £9,250 a year will drop to £7,500 a year.

Martin Lewis has described this as a ‘psychological change’, as it’ll only impact you if you actually pay off the total cost within 40 years – which many won’t.

If you’re already a graduate, you won’t be affected by any of these rules. These will only take effect from 2020/21 onwards and you won’t be reimbursed any costs if you’ve already been to university.

Disclaimer: All information and links are correct at the time of publishing.

author: Emily

By Emily

News: Student ‘loans’ to be replaced by grants News: Student ‘loans’ to be replaced by grants