Student loan penalties spark clash of views

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SCRAPPING plans to impose penalties for early student loan repayment has had a mixed reaction on Wearside.

The Government is expected to announce it will be abandoning proposals to impose penalties on students in England who pay off university loans early.

Coun Robert Oliver, Tory spokesman for education in Sunderland, said he welcomed the move to scrap the idea of penalties.

He said: “I think it is a good idea because student loans need to be flexible and take into account students’ changing circumstances.

“Student loans do offer a lot of protection for those on low incomes. I do think it is right that if people want to pay it off then really they should be able to do so without being penalised.”

However, Sharon Hodgson, MP for Washington and Sunderland West, who is also the Shadow Education Minister, said: “When the Government were trying to sell us their plans to land those who wanted to go to university in up to £40,000 worth of debt, we were told that this early repayment penalty was there to ensure the system was ‘progressive’ and didn’t favour the rich.

“Removing this penalty just means that those from wealthy backgrounds, who can afford to pay off such a large sum, can avoid paying the 30 years’ worth of interest and repayments that those who go into professions like teaching and nursing will never be able to get out of.

“Prioritising this just shows how out of touch ministers are with the concerns of ordinary young people who want to go to university, but are thinking twice because of the huge new fees. It’s another Lib Dem capitulation to the Tories, and yet again it’s the wealthy who will benefit most.”

Business Secretary Vince Cable had intended to introduce an early repayment penalty of about five per cent above a certain limit to prevent wealthier students avoiding interest charges on the new standard 30-year repayment plans.

However is is understood the Prime Minister, David Cameron, has decided to drop the scheme amid warnings it would be unfair on those wanting to repay their loans early.

From this September, loans of more than £16,000 a year will be offered to students to cover tuition fees and living expenses and graduates will pay back around nine per cent of anything they earn above the £21,000 a year threshold.

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