Fighting the Age War: A One-Sided Battle

By Danny Leach, Co-Chair

It was reported in the i newspaper earlier this week that the Government is understood to be planning a change to the terms of student loans. The repayment threshold will be dropped to £25,000 from the already long-frozen £27,295 and, even worse, the length of time over which graduates will be expected to repay their loans will be extended from 30 years to 40. Finally, they also plan to add a GCSE and A-Levels requirement – a slap in the face to the many thousands of working class and neurodivergent students who only found the atmosphere and support with which they could thrive at university. 

We should call this what it is: a new frontier in the war on the young. While relentless cuts have slashed provision for everyone in the last decade, the young have faced the worst brunt of them. Sure Start centres have closed up and down the country, real school spending per capita is down 9% on 2010, and tuition fees have trebled. And that’s all before we even leave education. Into the ‘real world’ we emerge to find starter salaries that have barely changed in 15 years, rents that have been steadily increasing in the same period, and house prices which make ownership no more than a pipedream for a majority of the under 30s. 

These changes will significantly increase the amount one could be expected to pay on student loans. Loans are paid at a rate of 9% above the threshold. 9% of the difference between the planned increase and the current threshold is £206.55, which would now be paid over 40 years instead of 30. That means repaying £6200 more over the 30 year period alone, never mind what you pay back in the extra decade of payments. Let’s imagine that post university, and towards the end of your career, you’ve done quite well for yourself, and now earn a nice round £50,000. The additional decade of payments at a lower threshold will cost you as much as £22,500. 

Yet, all this will still do little to reduce the treasury’s liability for Cameron and Clegg’s enormous accounting trick. The dirty secret of student loans is that repayment has always been out of reach for the average student. Let’s consider again our fairly high earning future scenario, where we average a £50,000 income in our career. Assuming no inflation above wage growth at all after 40 years you would have paid back £90,000 if you took a fairly average £50,000 loan, and still have an outstanding balance of £73,101. Under the old system, you would pay back £61,303 over your lifetime, and leave a balance of £60,060 for the state to clear. To be clear, I do not believe the current system of loans is any fairer. However, this comparison demonstrates that what is billed as a minor adjustment to student repayment thresholds is really a significant tax hike on the young specifically. You might notice that the written off amount increases by extending the period. For some reason, the Chancellor is much happier to commit some unfortunate successor to write off £70,000 than to simply pay the initial £50,000. We mortals can only imagine why this might be the case.

It should be noted that this is not just an unrealistic scenario, but an idealistic one. The borrowing rate on student loans is tied to the Retail Price Index which measures inflation. This is already a cynical move by the Government, as the RPI is always higher than the inflation index they use to calculate benefit and pension increases. In theory inflation measures price increases in all areas of the economy, and as a result your student loans are supposed to only increase in ‘real’ terms by between 0% and 3% depending on your income. That means aside from interest, the value of your loan should be the same as it was when you borrowed it, in terms of goods you could buy with the money. However, in reality, average wages are projected to rise by just £150 a year in money terms. This isn’t enough to even cover inflation. This means debts will probably be rising at a much higher rate than incomes for the next few years at least. 

It is often, and correctly, said that student loans are not really loans. They are in effect a graduate tax. However, we would never accept a tax implemented in such a ridiculous and unfair way. Firstly, it is a flat and therefore regressive tax. Someone on £30,000 pays the same proportion of their income above the threshold as someone on £150,000 despite the vastly different welfare effects this may have. Secondly, it creates a very high marginal income tax rate for young graduates. A graduate on £25,000 may soon be paying a marginal tax rate of 42.5%. Thirdly, it is a dishonest tax. Income tax and national insurance, regardless their merits in my view or yours, are plainly taxes, and everyone knows what rate they are paid at. Student loans are not advertised as taxes because, fourthly: if you can provide £27,750 and living expenses in cash before or shortly after you graduate, you can exempt yourself from a 9% tax your peers pay. So as a final insult, the wealthy are thus exempt from the most unfair, poorly thought out, and least progressive tax which Her Majesty’s Revenues and Customs see fit to levy. 

As I said, this is a war on the young. However, it isn’t being fought by the old. Instead, wealthy people have increasingly argued that it is cultural signifiers which make one working class, or otherwise. Liberally minded, city dwelling young people have been swept up and declared elites, and therefore an attack on their living standards is justified as progressive levelling up. Look deeper though, and it is clear that the younger generations in the UK contain some of the most underemployed and underpaid people in the country. In addition, they are the least property owning section of society and the most extortionately rented to. Tightening the screws on some of the most precarious in society while leaving untouched massive stockpiles of wealth and the incomes of the very richest isn’t just war on the young- it’s the new frontier in a class war. 

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