§ Mr. BoswellTo ask the Secretary of State for Education and Employment at what point of annual income a graduate with an income-contingent student loan will start to repay less in the current year than a graduate with an old-style mortgage loan. [96110]
§ Mr. WicksAssuming a borrower was repaying an old-style mortgage loan at £1,000 a year (reflecting a loan of £5,000 being repaid over a five year period), someone with an income-contingent loan of the same size would repay less until they earned over £21,111 a year.
The repayment of income contingent loans will he fairer than mortgage-style because it will be tied closely to income. Repayments will be based on 9 per cent. of income over £10,000 a year so that repayments will increase or decrease in line with changes in income. £21,111 would be quite a high salary for a new graduate, so most new graduates will initially be repaying small amounts each year in line with their income.
The repayment of mortgage style loans above a threshold—currently £18,192—is not income contingent. A fixed proportion of the loan has to be repaid each year: someone earning £20,000 a year will repay at the same rate as someone earning £40,000.