Think Tank Dismisses Coalition’s Early Repayment Charge Plans

Government proposals to transform how student loans are repaid have been criticised by thinktank CentreForum for being ineffective and costly. Government is looking for a “more progressive” mechanism for repayment whereby those on higher incomes will be subject to a higher rate of interest.  However, it has expressed concern that allowing early repayment would effectively enable those on higher incomes to ‘buy themselves out’ of this mechanism and has proposed levies on payments over a certain amount to stop it happening.

In response to the proposals, the liberal think tank CentreForum said it believed the scheme will not only be costly to administer but that it fails to recognise that most graduates making early repayments do so due to debt aversion, citing the Government’s own consultation document, which stated those making such payments had an average income of just £18,400. CentreForum report authors Tim Leuning and Gill Wyness said “Introducing a system of early repayment penalties for affluent graduates, or those who pay off large chunks of their loans, is crazy.”

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