Student record

Overhauling student loans is not the right way to reduce the number of universities

Mark Ross, Opinion Editor

The student loan system is changing. In order to reduce the exorbitant government tuition bill and reduce the number of graduates, some students will now repay a higher percentage of their loan.

Probably fair enough? Not when the poorest students, not the highest earners, pay.

In a recent speech, Universities Minister Michelle Donalan announced several changes to the way we repay our loans. First, from next year, new students will have their loans written off after 40 years, instead of 30 now.

Students will also start repaying their loans when they earn over £25,000, instead of the current threshold of £27,295.

And interest rates on loans will be adjusted to inflation. This means that students will not repay more than the value of their loans in real terms.

Given that as of March last year the government had £161bn of outstanding student debt on its books (expected to reach £500bn by 2043), these measures may seem justified. But these reforms will have the greatest impact on low-income graduates.

Indeed, the wealthiest graduates generally repay all of their loans within the allotted 30-year period. So this new policy just squeezes more money out of those who don’t earn enough to make it – low-income college graduates.

In fact, due to the interest rate freeze, graduates in the top 10% could see their lifetime repayments drop from £53,000 to £39,000. All this while those on ‘lower middle incomes’ pay nearly £19,000 more.

These changes reduce reimbursements for the wealthy by increasing the burden on those less able to pay. It seems like the Conservatives really are a “low tax” party, as long as you’re already rich.

No wonder ministers want to dissuade people from going to college

And these inequalities go beyond the rich-poor divide. On average, women will pay £6,600 more under the new system, while men will pay £5,500 less (due to the difference in work patterns between the two).

Looking back, one of the reasons for these changes is to reduce the number of people choosing to attend college. Classes are oversubscribed, the quality of education is declining – and the government is paying for it all.

For proof, look no further than some universities’ recent financial incentives for incoming students to defer their studies for a year. Space in lecture halls and libraries is clearly limited.

As the Education Secretary lamented, too many people choose student life. No wonder ministers want to dissuade people from going to college.

GCSE proposed minimum requirements for access to student loans, caps on enrollment numbers and loan adjustments are all examples of the government trying to undo Britain’s obsession with higher education .

But regressive taxation is not the solution. Instead of using financial barriers to deter prospective students (which usually results in the exclusion of disadvantaged groups), the government must provide attractive and sustainable alternatives to universities.

Specialized learning will therefore represent more for the government’s money

Certainly, the Minister of Universities, Michelle Donolan, has made impressive progress in this area. It targeted apprenticeships and professional alternatives at the university with the aim of diverting students from increasingly weak diplomas.

Donolan’s “Lifelong Loan Entitlement”, for example, allows people who work to access a loan equivalent to that of a 4-year university course. This can then be used to fund individual modules or courses which can be taken at the convenience of an employer or employee.

This means that workers can target specific skills needed for personal development. They can also organize their education around their professional commitments; this means that it will no longer be necessary to sacrifice 4 years of career to attend university to obtain a degree.

This will challenge the universities’ monopoly on higher education. The loan suggests it is possible to learn without going to college, encouraging more people to choose an alternative path.

This funding is also an efficient use of resources. Workers can borrow to fund a specific course that will have a direct impact on their careers, instead of spending £27,000 on general training they may never use, or pay back.

This selective and specialized learning will therefore be more profitable for the government.

Providing these alternative pathways to education will encourage school leavers and workers to choose a work/learning hybrid over university. Schemes like these are a positive and egalitarian way to reduce the gargantuan graduate population in the UK.

Overflowing universities don’t help anyone. Instead of clumsy attempts to close the doors to new students, the government should continue to show that valid alternatives exist. Four years of debt-fueled schooling isn’t the only way to succeed in life—if we were reminded of that, the flood of college-choosing students would dwindle to a manageable trickle.

Featured Image: Towfiqu barbhuiya/Unsplash


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