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Raising student fees – again!

The government plans big changes to the student loan system. Graduates will pay more. There has been some outcry. Is it justified?

Stephen McNairbyStephen McNair
March 6, 2022
in Education
studetnt loan app

Student loan app: photo by Graham Higgins via flickr (CC BY 2.0)

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The government has announced new plans for student loans, in response to the independent review of post 18 education and training which the May government commissioned. At the heart of the issue are two questions of balance: how do we share the costs of post school education between the community and the individual; and what is a fair balance of public education spending between those who go to University and those who don’t?

How did we get here?

Higher education has seen massive changes in the last 60 years. In 1960, there were 24 universities, recruiting 4 percent of school leavers, and tuition was, in practical terms, free. Now there are 165 universities; nearly half of all school leavers go; and the average three-year degree course costs a student around £50,000 in fees and living costs

To cope with the growing costs of higher education, student fees were introduced in 1998. They were accompanied by  a student loan scheme , and most students now take out a loan to cover these costs. However, the student loan is not a normal loan. Because some graduates go into worthwhile but poorly paid jobs, the loan is only repaid by people earning above £27,295 pa. and any outstanding balance is written off after 30 years. As a result, only 23 per cent of today’s students are expected to repay their loans in full.

While higher education has expanded, adult further education, which recruits from the half of school leavers who do not go to university, has been cut drastically. Commenting on this, the Augur Committee reported a 50 percent fall in funding since 2010, and said:

“This is one of the most important statistics in this entire report and cannot be justified in terms of either economics or social equity”.

Who should pay?

The higher education model of the 1950s assumed that the primary beneficiary of higher education was the community. Because universities provided highly qualified scientists, doctors, teachers and intellectuals, the community paid, through general taxation. The overall costs were relatively modest, because the numbers were small.

As numbers grew, the costs came under increasing scrutiny. The growing neoliberal consensus stressed the benefits to the individual, rather than the community. The claim was that, since, over a lifetime, graduates earned more than non graduates, they should make a contribution to the costs, and it is unfair that they should be subsidised by people who were not enjoying the opportunity.

Initially, the fee was a modest contribution, of £1000 a year, and the bulk of the costs of university teaching were still be met by the state. However, once the principle had been established, governments came to see fees as a way of funding higher education without visibly increasing public expenditure. As a result student fee income now accounts for around half the higher education budget. In reality, of course, this is an accounting trick. It is the state that lends the money (albeit through an agency), and much of the debt was to be written off in the end.

What is the government proposing?

Ministers are concerned at the way in which costs are growing. They claim that many degrees do not provide graduates with access to “graduate jobs”, and that there has been a growth of courses which do not deliver benefits for students, the economy or society. So the new consultation paper presents proposals for “reform”. The key proposals are:

Freeze maximum tuition fees at £9250 pa

Good for graduates, but a substantial cut in real income for universities.

Reduce the rate of interest on student loans

Currently graduates pay interest on loan debt of 3 percent on top of inflation. The proposal is to remove the 3 percent, so graduates would pay no effective interest on the loan. Again, an improvement for graduates, but in the short term this reduces the repayment income to the government

Reduce the income threshold below which loans repayments are frozen

At present repayments are frozen for graduates earning less than £27,295 a year. The proposal is to reduce this to £25,000. So more graduates would be repaying something.

Extend the repayment term

At present any outstanding debt is written off after 30 years. The proposal is to extend this to 40 years. This substantially increases the amount the government recovers, and means that many graduates will be repaying their loan for almost all their working lives.

Introduce minimum eligibility requirements

The government proposes, for the first time, to specify entry requirements (until now universities have always set their own entry requirements). This change may make access more difficult for some disadvantaged students.

A new lifelong loan entitlement

From 2025 a new lifelong loan entitlement, enough to pay for four years of further education, will be available for everyone. This would help level the opportunities between those who go to university and those who do not. However, the plans are still sketchy, and subject to a separate consultation.

What does the public think?

A survey by YouGov found some support for the general principles of the government’s policy. Two thirds of Britons already think going to university is unaffordable. But they are not in favour of tuition costs being entirely, or largely, funded by the taxpayer (as it still is in many European countries). They are also more likely to feel that too many people go to university.

What next?

The combined effect of these changes will be that graduates will end up paying around 80 percent of the costs, rather than the 56 percent they pay at the moment. They also mean a real-terms cut in funding to universities.

The Government’s parliamentary majority means that these changes are likely to go ahead, although the government’s consultation invites views on the plans. Nevertheless, there are many details still to be clarified, and major questions remain.

The consultation closes on 6th May 2022.


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Stephen McNair

Stephen McNair

Stephen McNair is retired and lives in Norfolk, where he is active in progressive politics. He spent most of his career working on education policy, especially adult education, at national and international level. He founded the Centre for Research into the Older Workforce, and chaired a European Scientific Research Committee on Demographic Change. Stephen is a member of the EAB editorial team.

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