Prime minister Keir Starmer has pledged to make the student loan system ‘fairer’, but what does this mean for the next generation of dental professionals?
The government has suggested that reforms of the student loan system such as reducing interest rates and altering the repayment threshold are being considered.
The British Dental Association (BDA) welcomed this news, stating that ‘meaningful reform’ of the system was ‘well overdue’. In an open letter to the government, the association said young dentists are currently ‘drowning in debt that many will never be able to repay’.
Due to the high level of debt accrued during dental training, the BDA said early career dentists face a ‘perfect storm’. With average earnings of £65,000, this group will pay the maximum interest rate on their loan without being able to pay off their loan quickly. The BDA estimated that dentists are therefore likely to repay twice what they originally borrowed.
The letter concludes: ‘This debt trap requires an urgent solution. While much of the public debate has focused on the interest rates applied, the crucial issue is the level at which the repayment threshold is set. For dentists on typical earnings, interest rate changes would make no difference to how much they end up repaying, but changes to thresholds would offer meaningful relief.
‘We have a dental service on its knees, and without real change here we could see the exodus from this service accelerate. Yes, plan 2 loans were an egregious mistake of the last government, but it is one this government can begin putting right as early as next week.’
What do opposing parties say about student loan reform?
Rival political parties have also suggested reforms to the student loan system. The Conservative Party has proposed reducing the maximum interest rate on plan 2 student loans to retail price index (RPI).
The Institute of Fiscal Studies (IFS) said this would lead to lower outstanding loan balances for graduates such as dentists who are earning over the lower interest rate threshold.
While this policy would not change the monthly amount that graduates repay, it would reduce the lifetime debt accrued. This would then reduce the total amount that mid and high earning graduates would repay.
On the other hand, the Liberal Democrats have proposed that the repayment threshold should increase every year in line with average earnings. The result would be a short-term reduction in monthly payments for those earning above the repayment threshold. However, lower payments would also lead to a higher outstanding balance.
Despite this, the Liberal Democrat policy would reduce the total lifetime amount that graduates would have to repay by an average of £8,000 in today’s prices.
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