Controversial plans to hit graduates with early repayment charges on student loans have been abandoned.

By Charlotte Beugge

Plans, which if implemented would have hit prudent graduates for paying off their student loans ahead of time, have been binned, it has emerged.

After a consultation period the government has decided to stay with the current system without penalties after listening to evidence that implementation of the plan would have penalised those averse to debt, according to the BBC.

The business secretary Vince Cable had intended to introduce an early repayment penalty which could have cost graduates thousands of pounds if they cleared their debts within 30 years of leaving university.

The plans would only have included student loans in England and the new system would have come into force this year when tuition fees will increase to up to £9,000 annually.

Ministers were considering introducing annual charges of around 5% on payments above a limit to prevent wealthier students avoiding interest charges on the new standard 30-year repayment plans.

But the BBC says that the government has now decided the evidence suggests those most likely to make extra payments were not the wealthy but those earning around £18,000. The announcement that the plan has been abandoned will be made within a few weeks.

Think tank CentreForum last year said that plans would be "ineffective and costly", adding that most graduates who overpay are not wealthy but are simply being prudent and have an aversion to debt.