Student loans penalty scheme dropped

16/02/2012
Plans to impose financial penalties on students who pay off their debts early have been abandoned, the government is expected to announce.

Ministers were thinking about applying five per cent annual charges on payments above a certain limit, in order to prevent wealthier students from avoiding interest charges on the new 30-year repayment plans by paying off their debts early.

However, the plans have been scrapped after fears that it would penalise hundreds of thousands of students from different income backgrounds.

The University and College Union secretary Sally Hunt criticised the government for failing to provide assistance for the more financially disadvantaged students.

"Government should be prioritising how to make it easier for poorer families to afford university rather than focusing on yet another policy designed to make life easier for the wealthiest in our society," she said.

Her opinion was echoed by Liam Burns, president of the National Union of Students, who warned that ministers' policies could "dupe" poorer students into chipping away at their debt, especially while simultaneously trying to buy a home or start a family.

The new scheme was to coincide with the higher tuition fees.

From September onwards, universities will be able to charge students up to £9,000 a year, which could leave many in need of debt help after they finish their degrees.

Posted by Fiona Tench

Related News

Debt problems affect 70% of Britons
OFT to review payday lenders
Debt 'noose' tightens around British spenders
Contact bank for debt help, experts advise
Nick Clegg's NEET scheme is 'drop in the ocean', says IPPR