By Vivienne Russell | 16 February 2012
The government is reported to be dropping its plan to levy extra charges on graduates who pay off their student loans early.
Ministers were considering introducing mortgage-style early-repayment penalties for the new student finance regime. It was intended to discourage the wealthiest graduates from buying themselves out of the system early.
But it is understood this will be scrapped after consultations revealed that students of modest means, as well as the wealthiest, would be keen to pay off their debts as quickly as possible.
The CentreForum think-tank, which last year called for the charging policy to be shelved, welcomed the news.
Chief economist Tim Leunig said: ‘This is the right decision taken for the right reasons. Evidence shows that the students who repay their loans early are not the wealthiest, but the most debt-averse.
‘Government should not penalise those who want to get out of debt for whatever reason.’
But the University and College Union said the government should be focusing on ensuring poorer students can go to university rather than acting to ‘make life easier for the wealthiest in our society’.
General secretary Sally Hunt said: ‘While no one would condemn any family that sought to pay off their children's debt as fast as possible, today’s move simply exposes yet again what an inconsistent mess the higher education reforms are.’
A spokesman for the Department for Business, Innovation and Skills said a formal announcement on changes to repayment arrangements would be made next week.
