What are the changes to Tuitions Fees and the new Graduate Tax?
Key Points:
Threshold to start paying is £21,000.
Each month, 9% of gross income above threshold goes toward repaying debt.
Interest rate on debt will be RPI linked (inflation) - as well as being progressive - i.e. 0% for incomes of £21,000 rising to 3% + for incomes over £41,000.
If the debt is not cleared within 30 years, it will be written off.
Maintenance grants will rise for households with earnings less than £25,000 - from £2,906 to £3,250.
The grants cut-off will be lowered from the current household income of £50,000 to £42,000.
Tuition Fees in England can go up to £9,000 - up from the current limit of £3,290 - and are expected to average £6,000.
The establishments charging more than £6,000 will have to become more open with bursaries, summer schools, outreach programmes - help people from poorer backgrounds get access to higher education.
The Institute of Fiscal Studies estimates that with a three year course, at £7,500 per year - the top 10% of graduates will clear their debts in 15 years, however a middle-earning graduate (£48,850) would need 26 years to pay their debt back. 10% of graduates will end up paying back more than they borrowed, after factoring inflation.
These plans are to be introduced from September 2012, so students who apply in 2011 but defer to 2012 will pay the increased fees. Anyone starting a course before September 2012 will not be subject to the increased fees.
Graduate Tax?
Vince Cable, Lib Dem, proposed this tax in July.
The plan now has the support of Labour leader, Ed Miliband, and the NUS (National Union of Students).
Under this plan, graduates would pay a percentage of their income, once graduated, to the Taxman. The increased taxation would then be apportioned to the universities somehow.
Possibly equivalent to another 3 pence on top of 'normal' income tax.
In a pure form, this would be levied for the whole of the individual's working life - However, it is still undecided as to what the mechanics of the scheme will be - whether the extra taxation would stop at a specific figure or time period is unknown as yet - nor if the tax kicks in after a set banding.
Possible increases in taxation of up to £16,000 for top earners - may result in more tax emigration.
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