In the recent budget, George Osbourne announced that student maintenance grants would end and be replaced by additional loans for students starting university from 2016-17.
Students with family incomes of £25,000 or less can currently recieve £3,387 of non-refundable grant. Under the new changes this will end and be replaced by a larger system of maintenance loans, allowing students to borrow up to an additional £8,200 to help with living costs.
Even before the introduction of these further loans, warnings have already sprung up about the unsustainability of the current amount of debt heaped on students by tuition fee loans. In November last year, the Higher Education Commission – an independent body set up to monitor further education – described the current loans system as ‘unsustainable‘ and offering the ‘worst of both worlds‘ to students, universities and the government. This is due to the fact that student debt has become so high estimates are suggesting that 73% of students will be unable to repay their fees before the end of the 30 year write off period, even if they are working in ‘respectable‘ public sector professions.
Mr Osbourne claimed the policy was to prevent universities from becoming underfunded and prevent the risk of students not getting university places. He citied estimates that the current system of grants, which costs the taxpayer a total of £1.57 billion a year, was due to rise in costs to £3 billion in the next decade as caps on student numbers are lifted. The chancellor also explained the proposals from an ideological standpoint, arguing there is ‘basic unfairness in asking taxpayers to fund grants for people who are likely to earn a lot more than them’.
With the indication tuition fees were doing exactly the opposite of making universities less reliant on the taxpayer, as the government is forced to use taxpayer’s money to fill the hole in its finances left by student debt, you would wonder why the decision to replace grants with loans seems viable. This is especially the case given the indications from the current system that make it even less likely that the government will see any of the money back. By all accounts the increase in the loan amount to more than double that offered by the grants system means the changed system will cost substantially more to operate than the previous system of grants.
Admittedly, it is true that there are some people who will pay the money back early to escape the mentality of being burdened with debt, regardless of how generous the repayment terms are in comparison to more ‘ordinary loans‘. The Conservative – Lib Dem government even encouraged this in 2012 by lifting the penalty that was in force for repaying the loans early. However, very few can raise such large amounts of money as are required to repay, and as a result the offer has not been taken up by many.
A by-product of this increased unaffordability will also be a change in the demographic of people going to university, risking returning higher education to a preserve of the well off as in years gone by. Prominent figures within the field of Higher Education, including the chairman of the Sutton Trust and Education Endowment Foundation Sir Peter Lampl and president of the National Union of Students Megan Dunn, have highlighted the fact the move could be potentially offputting for students from low and middle income families considering going to university. This is also backed up by research linking increases in grant aid to increases in participation – one study found that increasing the financial assistance available to students by £1000 resulted in a 3.95 percentage point increase in participation in Higher Education.
Sadly, it seems the government remains oblivious to the impact these changes will have on the diversity and number of students attending university. A further announcement in the budget revealed tuition fees could potentially be allowed to rise above £9,000 in line with inflation from 2017-18 for institutions which offer ‘high quality teaching‘ – which could make university even more inaccessible for those with low to middle range incomes. In spite of the warnings, it seems the problem of debt is set to plague students, universities and the government further as the potential consequences of a gap in the system grow ever greater as more money is lent.