Government's flagship postgraduate loan plan will leave students with 50% tax rate

4 December 2014 | last updated: 10 December 2015

Students who take out a new loan to fund a master's degree will effectively be paying a 50% tax rate, said the Institute for Fiscal Studies (IFS) today. UCU said the findings demonstrated the pitfalls of increasing students' debt to fund an expansion of postgraduate education and called for a rethink.

The IFS said students who take out the loans, announced yesterday by the chancellor, would lose 50% of their salary as basic rate taxpayers (20% income tax, plus 12% NI, plus 9% repayment of undergraduate loan, plus 9% repayment of postgraduate loan) and 60% as higher rate taxpayers.

UCU said the postgraduate loan proposals were a step towards addressing postgraduate funding problems, but that more radical ideas were needed to relieve the mounting debt burden on students. The union suggested that other options, like the restoration of grants for postgraduate study or a partial write-off of undergraduate debt for those completing postgraduate courses, would be more helpful.

UCU general secretary, Sally Hunt, said: 'The IFS analysis demonstrates the pitfalls of increasing students' debt burden to fund an expansion of postgraduate education. We were already unhappy that the loans were not being offered to students over 30 or those on a research master's and this latest revelation should signal a pause and a proper rethink.

'The noble aim of making it easier for students wishing to carry on studying should be at the heart of this policy. We will be delivering our own proposals in this area in the new year and are very happy to work with government and politicians of all stripes to deliver a much fairer system.'

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