Student tuition fees should be cut to £7,500 but graduates should be made to pay back more of their debts, an official review panel has said.
The Government-commissioned report claimed its recommendations would be fairer to both students and taxpayers, but critics have labelled them ‘a con’.
The panel, chaired by banker Philip Augar, wants fees of £9,250 a year reduced by 19 per cent, and rates of interest cut.
Student tuition fees should be cut to £7,500 but graduates should be made to pay back more of their debts, an official review panel has said
However, it also proposes changes that include extending the repayment period from 30 to 40 years and reducing the threshold at which graduates must start to pay debts.
That could increase the overall cost for many, with those on lower incomes and nearing retirement still required to make payments.
A cut in fees could save future taxpayers money as students will ultimately borrow less.
Higher levels of repayment will also mean fewer debts are wiped and a smaller bill has to be picked up by the public purse.
The wide-ranging report also recommends not charging students interest above the rate of inflation while they are studying.
The panel, chaired by banker Philip Augar, wants fees of £9,250 a year reduced by 19 per cent, and rates of interest cut
It also suggests capping the overall growth of the loan plus interest after university to 1.2 times the original loan.
There is also a proposal to help disadvantaged students by reintroducing maintenance grants, which were scrapped by George Osborne.
However, critics said the changes were ‘regressive’ because they ultimately help the highest earners, who will repay their debts in full, by reducing the initial amount they have to borrow.
Under the current system, graduates repay 9 per cent of their earnings over the salary threshold of £25,725 – and all debts are wiped after 30 years.
The report proposes reducing the threshold for repayment to £23,000 and extending the amount of time they must pay to 40 years.
Low and middle-income graduates would end up paying back more than they do under the current system. And many more will actually end up repaying their debts in full.
But Bill Rammell, vice-chancellor of the University of Bedfordshire, and a higher education minister in the last Labour government, branded it ‘a complete con’.
There is also a proposal to help disadvantaged students by reintroducing maintenance grants, which were scrapped by George Osborne
He said: ‘The proposal is regressive and will lead to lower-paid graduates being forced to pay back their loans until they are well into their 60s, contributing more to the cost of their university education.
‘While the headline may sound appealing, this policy will be proven deeply unpopular.’
Martin Lewis, founder of MoneySavingExpert.com, said lowering the repayment threshold will cost graduates earning more than £23,000 an extra £15 a month, or £180 a year
Martin Lewis, founder of MoneySavingExpert.com, said lowering the repayment threshold will cost graduates earning more than £23,000 an extra £15 a month, or £180 a year.
He added: ‘This means many graduates will repay more, for far longer, substantially increasing the total cost.’
Dr Tim Bradshaw, head of the elite Russell Group universities, said: ‘We are concerned that the overall impact of the proposed reforms will be to place a greater burden on graduates on low and middle incomes.’
But the report said: ‘We question whether it is right to have a fee and loan system where so few borrowers can expect to clear their debt fully.
‘We question the justification for a system which excludes so much of a borrower’s earnings from any repayment and which helps to reinforce the ‘no win, no pay’ element.’
The review was commissioned by Theresa May – her successor will have to decide whether to implement the findings.