Education & Family

Higher debts may deter poor students from university, says report

Students Image copyright PA
Image caption Universities have argued for an increase in fees

Poorer students in England may be put off university by funding changes that could leave them with higher debts than middle-class graduates helped by their parents, a report says.

The Sutton Trust's commission on fees looked at Budget changes such as replacing means-tested grants with loans and tying fees to inflation.

It also calls for a full investigation of the student finance system.

Ministers say students will have more cash for living costs under the plan.

The trust - which advocates social mobility through education - set up the Independent Commission on Fees in 2012 to monitor the effect of higher tuition fees.

This report comes after Chancellor George Osborne announced he was scrapping means-tested maintenance loans for poorer students and allowing universities to increase fees in line with inflation - if they demonstrate excellent teaching.

The commission contends that linking tuition fees to inflation could see them rise to £10,000 a year by 2020.

It examines the higher education finance system for England, which allows universities to charge maximum yearly tuition fees of £9,000.

These are paid through upfront, government-backed loans with repayments beginning once the graduate starts earning £21,000 a year.

Value for money

The report says poor students could rack up loans of about £53,000 for a three-year course once the new maintenance loans are included.

It is assumed that students from richer homes would be helped financially by their parents.

However, it notes that since the change to higher fees of £9,000, only 5% of students are thought likely to pay back their loans fully by the age of 40, compared with half of students under the old system.

It questions whether the system is value for money for the student and for the taxpayer and calls for the Office for Budget Responsibility to conduct an investigation into this.

"The OBR should investigate the system as a whole including the impact of this latest measure on likely repayments.

"The remit of this investigation should include an analysis of how the costs of higher education are now being shouldered and to what extent this is both ethical and sustainable."

The commission, chaired by Will Hutton, cautions against any "substantive increases in fees" or "removing the cap" on fees completely.

It stresses that there is still an "insufficient understanding of the long-term effects of the debts incurred in this process".

Quality threshold

Mr Hutton said: "Debt is likely to become a bigger issue. Under the current system, nearly three-quarters of students will fail to clear their student loans before they are written off after 30 years, and the large majority will still be paying off their loans well into their forties, figures that will increase with the abolition of grants and increase in fees.

"At the same time, it looks increasingly likely that any anticipated gains to the Treasury will be largely wiped out by these non-payments."

Previous research by the Sutton Trust found that the Exchequer is forecast not to recoup around 45% of its loans.

A Department for Business, Innovation and Skills spokesperson said: "We are committed to giving everyone the opportunity to get a degree, regardless of their background or ability to pay.

"Students will get more money in their pockets to help with living costs and lifting the cap on student numbers means that more people will be able to benefit from higher education than ever before.

"The Budget was clear that only institutions offering high-quality teaching will be able to increase tuition fees in line with inflation from 2017-18."

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