Tuition fees: how are loans changing and have students been betrayed?

New students starting university in September 2023 will have to repay their loans differently. Credit: PA

In 25 years the cost of attending university has rocketed from £1,000 a year to £9,000 for students in England and financing higher education is about to get even tougher.

The Liberal Democrats promised to abolish tuition fees - which had grown to £3,000 - in their 2010 election campaign but, by the end of that year, the coalition government they formed tripled them.

Now Labour, the party expected to take the keys to Number 10 next year, has abandoned its pledge to scrap the fees in another Keir Starmer U-turn that has angered the party's left.

And from September, new students will have to start repaying their loans sooner and for a longer proportion of their working lives.

Senior minister Tom Tugendhat did not deny the government was putting people off university when asked on Good Morning Britain and instead talked about the benefit of apprenticeships.

So are political parties reversing their previous drive to get people to university - and how exactly is the system changing?

Have students been betrayed?

Keir Starmer promised to abolish tuition fees when he was running to replace Jeremy Corbyn as Labour leader in 2020 but three years later that promise appears dead in the water.

"We are likely to move on from that commitment because we do find ourselves in a different financial situation," he told the BBC this week.

He said he'd "set out a fairer solution" in the coming weeks but did not explain what that would be.

SNP Westminster leader Stephen Flyn described the Labour leader's U-turn as his "Nick Clegg moment", referencing the Liberal Democrat's broken promise in 2010.

Speaking in the Commons, Mr Flynn told Prime Minister's Questions: "In 2010 David Cameron convinced Nick Clegg to drop his pledge on university tuition fees.

"Does the prime minister intend to take the credit for convincing the leader of the Labour Party to do likewise?"

Rishi Sunak, to laughter, replied: "I thank the honourable gentleman for the question. It's hard to keep up with the list of broken promises.

"What I would say on tuition fees is I'm proud under this government that we now have a record number of people that are going to university from disadvantaged backgrounds."

Labour Shadow Chancellor Rachel Reeves insisted the party's principles had not changed as she blamed the government's handling of the economy for the position shift.

“The Tories have crashed the economy, they have brought public services to their knees and that does mean that we need to look again at what we can afford and what our priorities will be if we have the privilege to form the next government," she told Good Morning Britain.

After the Liberal Democrats broke their promise to scrap tuition fees in 2010 by actually allowing them to triple when propping up the Tories in government, many young people will feel they cannot trust political parties to stick to their word.

How is the tuition fee loan system changing for new students?

There are three main changes coming in for new students joining university in September 2023.

Their tuition fees will be repaid under a system called Plan Five Loans and annual payments are set at 9% of their yearly earnings.

  • The threshold at which graduates will start repaying their loan will fall from £27,295 to £25,000

It means repayments will start repaying loans earlier when people start earning and will pay a higher proportion of their salary (more below).

  • The threshold at which remaining student debt will be wiped will raise from 30 to 40 years

It means graduates will be forced to continue paying their student loan for another decade, the vast majority of their working life

  • Interest rates will fall slightly, in a boost for graduates they will only based on the rate of RPI inflation (Retail Price Index), rather than RPI plus 3%

With student loan interest rates based on inflation, it means there is no real terms increase.

What does it all mean in numbers? Martin Lewis explains

Workers will pay a 9% "graduate tax" on their earnings for 40 years of their lives, rather than 30, says Money Saving Expert Martin Lewis.

He said under the new system "many graduates will pay double under the new system [compared to] what they do under the current system.

For example, people earning £30,000 will pay £450 a year under the new system compared to £243 on the old, according to Regent College London.

Currently, Mr Lewis said, the state pays 44p in every pound for the cost of university education but from September the state will pay just 19p per pound.

Despite the changes which appear to make attending university financially more difficult, Mr Sunak said he is "proud" that there is "a record number of people that are going to university from disadvantaged backgrounds".

Education Secretary Gillian Keegan, the minister behind a push for more apprenticeships, denied government policies were discouraging people from attending university when asked by ITV News.

She pointed to a reduction in interest rates as a policy designed to make higher education more affordable.

"That makes it cheaper but we have people longer to pay back - the aim is to get most graduates to pay back their student loan."

"There are alternatives," she said, "the apprenticeship route is fully funded and you get paid," adding: "We just want to make sure that everybody is aware that there are two routes to pretty much every career."