The Government’s mooting a graduate tax for all UK students. Yet we already have that: in effect, it’s exactly what the student loan is; the only difference is once you’ve repaid, what you owe it stops.

I often think calling the post-1998 student loan system a loan is a bit of a misnomer …

1. It’s collected via the payroll on top of and just like income tax (giving the advantage of very low default rates).

2. You only repay if you earn above £15,000.

3. Repayments are proportional to income; you repay 9% of everything earned above £15,000, so the more you earn, the more you repay.

4. If you don’t repay it after a certain time (c. 25 years – it depends on when you got it), you don’t need to repay it.

5. The rate is fixed annually and the highest it will be is the RPI rate of inflation in the March, thus there is no ‘real’ cost to the loan.

6. It doesn’t impact your credit file. Therefore it has no impact on your credit worthiness for getting a mortgage or other borrowing.

For full explanation see the Student Loans guide

So, in effect, it is far more like a tax than a loan. The only difference is, once you’ve repaid, what you owe it stops.

I’ve had scant reading time on this, as I’m blogging while out filming, but, on a cursory read, replace it with a graduate tax and it’ll be almost identical – except you won’t only repay what you owe.

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