Student rates

Augar’s response: ‘highest earners benefit’ in student loan overhaul

The Westminster government will force graduates to repay more of their loans to build a ‘more sustainable’ student finance system in England, but there are warnings that the highest earning graduates will be the ones to benefit from the changes , with most others worse off.

The package of student funding changes unveiled on February 24 will see the loan repayment threshold lowered to £25,000 from just over £27,000 for new borrowers starting classes from September 2023, the repayment term extended to 40 years from 30 years and lowered interest rates so loan balances only increase with the retail price index of inflation.

The government has also announced that tuition fees will be frozen at £9,250 for two more years – until 2024-25 inclusive – dealing a blow to universities over funding with what will be a freeze of at least seven years in total.

The changes were announced as part of the government’s broader response to the Augar review of post-18 education.

The government will also publish a consultation on February 24 on proposals to control student numbers and minimum entry requirements to qualify for student loans – although Higher Education Minister Michelle Donelan has sought to downplay the issue. impact of these – and on the lifetime right to training (LLE).

Changes to student funding would create a “fairer and more sustainable student funding system that would keep higher education accessible and accountable”, said Nadhim Zahawi, education secretary. “These changes will create a fairer system for students and the taxpayer.

However, Labour’s shadow education secretary Bridget Phillipson called the move “a new stealth tax for new graduates starting their working lives, which will hit those on lower incomes the hardest”.

Gavan Conlon, a partner at London Economics, who has previously compiled analytical reports on higher education policy for the government, said: “The graduates who will benefit the most from these policies are the highest earning graduates – mainly men. Most other graduates will be worse off.

Dr Conlon estimated the government would claw back around £540m per cohort of graduates as a result of changes to student funding.

He added: “Under the current system, only the highest earning graduates repay their loans, and the real interest rate means they stay in the system and continue to make repayments, ultimately paying more and subsidizing the loans. less well paid. Reducing the real interest rate to zero means that these high earners will pay less. In contrast, with the increase in the repayment period to 40 years, middle-income graduates will continue to repay even more during their working lives.

But according to an Education Department briefing: “Without action, only 23% of borrowers entering full-time tertiary education next year are expected to repay their loans in full, with the rest being borne by the taxpayer. This must change – and our reforms will mean that 52% of borrowers will repay their loans in full.

“Taxpayers – most of whom have not been to university themselves – fund 44p of every pound of student loans given to full-time undergraduates. Going forward, taxpayers will fund less than 20 pence in the pound of new loans issued each year, and more than half of students will repay their loan in full.

On controlling student numbers, the DfE said it would “consult on the general principle of controlling student numbers to limit growth in supply which does not lead to good outcomes for students and to steer growth towards the supply side with the best results, and in high priority areas that are important to the economy”.

On the right to lifelong learning – which will “help students to study, train, retrain or improve at any stage of their life through flexible and modular courses” – the department stated that it would “seek views on our ambition, objectives and coverage, together with aspects such as modularity, maintainability, flexibility and quality”. Universities, while supporting the LLE, can have concerns about any intention of the government to use it to steer students away from degrees.

The DfE also said ministers would announce “nearly £900m of new investment in our fantastic HE system over the next three years”, including “£300m of recurring funding and a total of £450m of pounds of capital funding over the next three years”. years to support high-quality teaching and new state-of-the-art facilities, which we will ask the Office for Students (OfS) to distribute through the Strategic Priorities Grant (SPG).

“This funding will be used to increase the supply the nation needs, including science and engineering courses, courses to support the NHS and shorter degree alternatives focused on developing the right skills for our economy. dynamic.”

And the DfE said it would “invest up to £75m to provide a National State Scholarship, which will support high achieving students in higher education, further education and apprenticeships who may not have -be otherwise unable to access opportunities to pursue their choice. path”. Design options could include “targeting students based on a range of criteria, such as household income and achievement of certain A-level grades”.

Ms Phillipson, from Labour, said of the proposed minimum entry requirements: ‘Instead of focusing on supporting more students to succeed in school or expanding access to university, the government is slamming the door on opportunities.

“Parents and grandparents across the country are incredibly proud of their children who are working hard to get degrees that the government is flouting. It’s insulting.

Alistair Jarvis, chief executive of Universities UK, said: “The country needs its universities and graduates to be at the forefront of the post-Covid economic recovery, supporting the NHS and creating good jobs in local communities. Now is not the time to cut back or underfund universities, nor to limit aspirations by limiting the number of places to study at university.

He added, “The increase in grant funding is positive; however, the tuition freeze for another three years is forcing universities to do more with less.

Tim Bradshaw, chief executive of the Russell Group, said while new investment was “very welcome”, freezing tuition fees “inevitably reduces their value over time, so it will add to the financial pressure on universities. to scale while maintaining quality and choice for students.”

Gordon McKenzie, the managing director of GuildHE, welcomed the prospect of further progress in the LLE, but expressed concern over plans for minimum entry requirements. Pupils with special educational needs ‘are much less likely to get Year 4 GCSEs in English and Maths, but [they] can and do succeed in a range of higher education courses that suit them,” he said.

“Similarly, we are concerned about the idea that ministers are using control of student numbers to promote some courses at the expense of others, trying to predict what will happen to the economy and the labor market for decades to come.”

Diana Beech, chief executive of London Higher and former political adviser to Conservative university ministers, said: ‘Despite only outlining potential directions of travel, it is nevertheless concerning to see minimum eligibility requirements being presented. as the key to unlocking future student access. loans.

London data show that this would have dire consequences for pupils in London’s most deprived communities, excluding almost half (49.4%) of learners eligible for free school meals in the outskirts of London who do not graduate from ninth grade at year 4 in English and GCSE maths, 40.1% of black pupils and 86.1% of SEN pupils.

Dr Beech also said the sector was “already stretched unnecessarily in response to multiple consultations by the Student Union on future regulations. In the interest of duly considered responses, we call on the government to put an end to this carpet bombardment of consultations. »

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