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Student loans: would a graduate tax be a better option?

Graduation

The UK government has announced plans to change the system of student loans in England, which will increase the amount of repayments collected from future graduates.

In 2017, the Institute for Fiscal Studies expected only 55% of the government’s up-front spending on fees and maintenance loans to be repaid, with the rest to be contributed by taxpayers. This expected taxpayer contribution has since got even bigger.

The changes are intended to make it affordable for the government to maintain the current system in which students do not have to pay their fees up front and each student is eligible for a loan to cover part of their living costs.

But a time-limited “graduate tax”-style policy could achieve this same outcome while better addressing the preferences and concerns of students, causing less harm to lower and middle-income earning graduates, and enabling the language of “debt” and “loans” to be removed from the system.

Read the full blog here