Graduate fine scheme for early loan repayment is to be scrapped

The threat of financial penalties for graduates who pay off their student loans early has now been lifted, according to media reports from a Downing Street source.

Business secretary Vince Cable had intended to introduce the penalty - ministers were considering annual charges of around 5 per cent on repayments above a certain limit in order to prevent wealthier students avoiding interest charges on the new standard 30-year repayment plans.  The result could have cost young people in England thousands of pounds.

However, reports today said that after consultation the government had decided the evidence suggested those most likely to make the extra payments were not the better-off graduates, but those earning around £18,000.

The government is expected to confirm the announcement within weeks and are also thought to have agreed a deal with the Lib Dems - who supported the scheme - that in return for scrapping the proposed penalties they would drop their opposition to the appointment of Professor Les Ebdon as the new head of the Office for Fair Access (as the Complete University Guide reported recently, giving details of his tough plans for widening university access).

 Full story in the Independent newspaper and on the BBC website