Student Loans Are A Stealth Tax on Young People

The Chancellor has described the student loans system as “fair and reasonable”. For many graduates, including those here in Newbury and West Berkshire, it feels anything but freezing the student loan repayment threshold is no different from a stealth tax. If these thresholds remain frozen until 2031, the repayment level will effectively align with the minimum wage. That means graduates starting out in low-paid or insecure work will begin repayments almost immediately, even as living costs remain stubbornly high.

This comes at a time when young people are entering an increasingly difficult jobs market, with wages failing to keep pace with housing, transport and energy costs. Locally, I have heard from students and graduates worried about affordability, debt, and whether they can afford to stay in the area where they grew up in.

The situation is made worse by the extension of the repayment period to 40 years, tying many, particularly those from disadvantaged backgrounds to a lifetime of repayments. For students who already had to rely heavily on loans just to get by, this risks entrenching inequality rather than reducing it.

The Government says it plans to reintroduce maintenance grants, but the reality does not match the rhetoric. Of the £450 million raised through the international student levy, just £5 million has been earmarked for maintenance grants. That is simply not good enough.

We need to begin uprating the graduate repayment thresholds so that those starting out in their careers are not trapped by ballooning marginal tax rates. And if we are serious about reducing long-term debt, we must properly reintroduce maintenance grants, so students are not forced to borrow just to survive.

Higher education should open doors, not lock young people into decades of debt. This system needs reform, and graduates deserve better.