Justine Greening is the latest in a long trend of, sadly usually student, voices criticizing the current university fee and student loan system. But fuss over fees, loans, and debt is at best a distraction from the real issues, and harmful in of itself.
Make no mistake, the current system is a mess. Tens of thousands of pounds of debt, terrifying degree prices, and loans for (a significant period of your) life. But the mess isn’t these details; the mess is that these details are front and center – and not reflective of the reality.
Students have not been put off from applying. The year-on-year figures for school-leavers have instead shown continuous growth in applications. They know, even as voices of misinformation cry otherwise, that they can afford to go to university even if they are from a poor background because there is no upfront cost to doing so. They also know there’s no cost down the line, should things not work out. The debt is meaningless, and it’ll be wiped off after 30 years anyway, with it potentially never affecting them.
I myself will be leaving university having accumulated well over £50,000 in student loan debt, but what does that even mean?
The interest alone, accruing likely at a rate of around 4% or so for the first year, will be around £2,000. In order to even be paying that back in that first year, I’d have to be earning over £43,000, and if I was earning that much, the interest would actually be accruing at a rate of around 6% or so. The interest in the first year would then actually be around £3,000, and I’d have to be earning over £54,000 to be paying it off. (Don’t worry, the interest rate is stable with income once you’re earning that sort of money.)
If this all reads like scary nonsense to you, that’s because it is scary nonsense. It makes no difference to me how big the debt is because the repayments are the same regardless (9% of any income over the threshold, currently set at £21,000 a year). In fact, the size of the debt has nothing to do with anything at all, except for how long you’ll be making ‘repayments’. But for most people, the size of the original sum and the rate of interest will guarantee that they’ll be paying (or not paying, if they’re not earning above the threshold), for the full 30 years before the ‘debt’ is wiped clean and they never have to worry about any of this ever again. Which is to say that the exact size of the debt makes no difference whatsoever.
The debt isn’t just meaningless to the individual though, it’s also meaningless to the government. They’re not losing out on money because you haven’t paid it back – that implies there’s some magic fairy-tale world in which you could have gotten a degree without the government having to pay anything. With no fees and with grants instead of loans, the state would still be paying out the same amounts (to universities and students directly), the only difference would be that it wouldn’t get anything back from ‘repayments’, because there’d be nothing to repay. And removing tuition fees, say by raising taxes (even only for the rich), just shifts some of the ‘repayments’ onto those who haven’t taken extra years of free education, nor a bunch of free money to live on while they study.
So what on earth is actually happening?
The un-messy truth of our current system is that it is a graduate tax. You go to university, and if you end up earning lots of money afterwards, you pay some back for the free education you were given (and for the free money you were given towards living expenses). If you don’t earn a lot of money afterwards (and, for comparison with the £21,000 threshold, the median earnings in the UK last year were around £28,600), then you pay nothing back.
How much do you pay back? Eternally earning last year’s median earnings you would, after 30 years, have paid back around £20,500. After that, of course, the ‘debt’ is wiped and you pay nothing more. So how useful is it to think of a university degree being £9,000 a year, when you will actually pay less than 3 years of that (£27,000) as a median wage earner, and nothing of the maintenance loans?
It’s all meaningless, distracting, empty numbers. Except, when it comes to the end of that previous paragraph. Except when it comes to maintenance loans.
Because maintenance loans are the one thing that actually have an effect – and it’s an upfront effect – on students. And it’s not because they’re not (partially) grants anymore. And it’s not because of what they mean for poor students. It’s because of what they mean for more well-off students.
Maintenance loans mean nothing to poor students. Not really. Poor students get the full whack (I get the full whack, or at least enough that my parents do not supplement that amount). Richer students, though, do not. Richer students, and I use the word ‘richer’ quite loosely, are expected to have their living costs covered in part by their parents. Regardless of whether their parents can afford it, and regardless of whether they actually give their (now adult) children anything.
If poor students have to work part-time so that they can afford their rent, it’s likely that there’ll be numerous (supposedly) more well-off students who have it much worse, because their parents aren’t filling the gap between the maximum maintenance loan and what they actually get given. So absolutely do something about rising rent prices, but do not pretend it’s something that only affects students from poor backgrounds.
And it’s these two issues, maintenance loans being means-tested against household income and high rent prices, which are the actual issues students and potential students are facing when it comes to finances. Talk of anything else is mere contribution to a separate issue; how stupidly confusing and scary the current system appears on its surface.