'The argument over student loans could kill the next generation's...' blog discussion

johnfwoods

I didn't get into the LSE and was grateful to get into the Regent Street polytechnic to do my degree in economics. However, I had a free education and got my degree and earned at least 50% more in salary as I would have done without it. I also got on many more shortlists and got better jobs because of my degree. I still found it hard work to buy a house and obtained half of the deposit from my parents which I repaid in three years.
The problem with the current rise in tuition fees is that it is not a gradual increase of, say, 25% but of 200% and for many courses, including the Humanities, the subsidies have been removed completely. The coalition is using the deficit to change completely the way that education is funded and many poorer students will not take the chance of having a £30,000 debt at the end of their course, despite the promises about the stages of repayment. I know several students that graduated in the past ten years, who are still burdened by student debt and do not earn enough to pay it off.

DisobedientLemming

In the Conservative Manifesto 2010 on page 17 they stated they would:

"provide 10,000 extra university places this
year, paid for by giving graduates incentives
to pay back their student loans early on an
entirely voluntary basis."

This needs to be brought up if anyone so much as hints at the prospect of not allowing early repayment.

They promised incentives for early repayment, not a ban on early repayment!

reevery

I am very reluctantly going to step in here, and I hesitate only because I am directly involved in all of this. To protect myself I won't say how, but I will state that these views are all my own personal opinions.

Firstly, I wanted to say to Martin that this is a fantastic post. I agree with you that the biggest barrier is about pursuading people that being able to go to University is nothing to do with cost, but all to do with value.

Value? There are a number of things you need to consider about university study. Firstly, you are not there to be taught what to learn, like you are at school. This means you need to do some work yourself. You have access to top academics and yes, institutions are measurable against how much time you spend in lectures or seminars, but these are supposed to teach you how to think for yourself, not be taught what to think. Actually, I think the school system is failing us for teaching such a well-defined syllabus that people expect it at university too. If you therefore only count the number of hours you can spend in front of an academic when establishing the value of study, then you're seriously underselling yourself.

Furthermore, value isn't about what you're getting when you're at university. It's about what you get from it. Applicants need to look at employability, and what the benefit is of going to university and not. One previous poster hit the nail on the head in comparing the difference in what you might earn with and without a degree. This is so difficult to do. The Government (bless them) estimated that around £400k when top-up fees came in in 2006, this year it's nearer £100k (which I think is about right for an average). So if you earn even half that over the course of your career, you've easily covered the cost of your £30k degree.

A key task for universities is about communcating this to school pupils. Most universities spend a significant amount of their income on promoting and developing access, particularly to those excellent students who aren't encouraged to study by their parents or schools. This includes bursaries to those from low-income families. This is the one biggest reason why I disagree with the poster who said students shouldn't be "subsidising" other students. By the way, most of this spend is in lieu of living expenses, which is also included in the loan (or at least was in my day).

The other reason I think we should be subsidising is that all subjects have an equal importance. There has been a lot of fuss from Arts and Humanities academics who believe their funding is being cut, and thus think they're not valued. All that is happening, as far as I can see, is that the threshold for what money comes from the Government and what comes from the student is being moved. It appears that the difference between subject groups is remaining the same, hence the Science, Engineering and Medicine grants still exist.

If those grants aren't made, and we charge different amounts for different subjects, students will look at the difference in COST between the two subjects. This completely defeats the object of talking about value. Literature is as important as medicine, it's just a different type of value. A journalist slips on the ice and breaks their arm. Goes to hospital. In the waiting room they read the magazines or watches the TV showing the news channel (perhaps it keeps them sane?). There's a full circle in there somewhere...

If you are studying a first degree and are from Europe, then you can get the loan. It's a very good loan at the moment, and I am disappointed that it will be weakened by having a higher rate of interest and that Government are talking about penalising those people who can or want to repay it because it may become more expensive than another loan. This doesn't seem right. It appears that all the Government wants to do is shift the liability for this debt away from subsidising the interest rates to writing off the debt after 30 years.

I'll go on record and say that really the loan system also needs to include the capacity to fund postgraduate study, although it does make an effort to support part-time study which will be of benefit to mature students or those who have to work to support their education.

Now, of course, everyone is clearly seeing the hike in fees, but this is largely disguising the fact that the teaching grant is being cut. So it's not that my employer wants to put fees up - if we are getting a cut of, say £50m, we would be bankrupted if we didn't.

There are other alternatives to raising that money, but as a nation we are not mature enough to consider them properly. Philanthropy is massive in the US - most universities have endowments which pay tens of millions of dollars a year. In the UK, you're doing well if you reach eight figures. Normal donations are also increasing and generally go to support bursaries or capital projects which wouldn't otherwise be affordable.

Universities started out being free - they were paid for from Government budgets (taxpayers' money). Then in came some tuition fee, in a couple of stages, leaving us with a system that meant students need to take some responsibility for their education. The top-up fee was supposed to create a market - some institutions would teach more students for less, and arguably provide a lesser "student experience". But the grant didn't make this possible, so most institutions set the maximum fee and balanced the size of their student population so they could at least break even.

So now the Government want out. They need to make cuts, so they cut the teaching grant. It's a bit peculiar, because they need to spend as much on the loan system, at least for the time being, but in the long run can recover most of that income (and, with higher interest rates, maybe even turn a profit?).

Ultimately the taxpayer is still paying, but it's specific taxpayers with a loan who will be paying in the future. The fees being discussed are reflective of the cost of study, and not really close to the true value of a degree. Furthermore, people who have already paid off their loan or never had one in the first place could consider the value to them and could help out current students by making a donation today, rather than sitting shouting at politicians. [For the record, I give to a university].

My last word I have reserved to whether students will still go to university. Those who understand value and the true effect of the loan system will hopefully see that it can benefit them dramatically. If fewer people go to university, the value will actually increase. Demand won't dry up, but the market will have to change. How, we don't really know because this is rather unprecidented.

I realise this was a long post, and if you've read through it all, thank you. Please don't think that I endorse the Government's plans. I think there are some good ideas in the proposals, particularly those which improve access and encourage [academic and physical] development. But I do think the NUS have made this a lot worse by communicating false signals about cost, and nothing about the value.

jmcdyre

I honestly don't think it's unfair asking people to pay for their degrees once they're earning enough.
If anything it will make people seriously think about what course to sit instead of sitting some of the ridiculous mickey mouse course that are available (eg media studies).
Also, more people could do professional qualifications on the job, such as accounting - I'm an accountant with a degree, but had to study CIMA anyway, could've just missed the degree out altogether!
By reducing the number of silly degrees available, those with useful (or necessary) degrees could perhaps command even higher salaries with which to repay the costs quicker. Graduates are ten a penny nowadays, and having a degree really isn't a game changer with job applications I see, experience is.

Diesel_Princess

Topical at the moment, tuition fees are big in the news. I think students should pay to enhance their education however, we should look at some of the courses which are on offer.

If a profession is short of manpower such as nurses,doctors & IT Consultants the courses should be free. Courses which are over subscirbed such as Media studies, sociology, Drama etc should be priced at a higher rate. This would reduce the number of candidates studying for skills which are not needed in this country and reduce the amount of foreign candidates being brought in to carry out the professions where we have a short fall, thus providing massive savings and a fairer system.

Stochasticity

jmaster wrote: »

Many people are confusing this fees debate with the day to day costs of going to uni. This is the thing that has to be addressed. Student loans do not meet the true cost and are putting off many.

It is true that student loans alone often do not come close to covering the full cost of living as a student (tuition fees + rent even at university halls of residence rates + reasonable day-to-day living costs even defined as £65p/w as per JSA for over 25s), especially in London as per my own experience. Parental contributions, bursaries and/or part-time work are necessary to supplement the student loan.

_Nednats wrote:

The old argument for student loans is people who go to university earn more when they leave therefore they can afford to pay for it out of their wage.
since 15k is an average wage raising to 21k less people will have to pay it.
How long of not paying off your student loan do have under the system before you don't need to pay it back?
Not everyone who leaves university becomes a high earenr. What if a lot of people leaving univeristy doesn't become high earners? - there are going to be alot of loans not being paided off.

Currently loans are written off 25 years after you enter repayment, under the proposals it is to become 30 years. You're right that a lot more loans are not going to be paid off (at least in full) and that there will be higher write-off costs for the government as a result. Reevery is completely correct in pointing out that "it appears that all the Government wants to do is shift the liability for this debt away from subsidising the interest rates to writing off the debt after 30 years" and that that's a relatively stupid accounting trick rather than a useful reform.

_johnfwoods wrote:

I know several students that graduated in the past ten years, who are still burdened by student debt and do not earn enough to pay it off.

In what way are they burdened by it then if they're not obligated to pay back a penny towards it?

reevery wrote:

There are other alternatives to raising that money, but as a nation we are not mature enough to consider them properly.

Although this is a slightly separate discussion, I agree that the government is somewhat misguided in conceptualising the funding of higher education as having to come from either the student or the taxpayer. The third group that benefits hugely from an educated workforce is business, and they are getting a great deal out of the current system and will continue to do so under the proposals, reaping the rewards with very little to no investment risk on their part.

antonia1

MSE_Martin wrote: »

Basically you will pay more tax once you're over a certain level. So I would HOPE students repay the loan, rather than have it wiped - as that means they'll be earning more. The new system ahs some real problems but it shouldn't put off bright students from studying - and we must be careful not to use the rhetoric of fear (sort of going back to my blog points really)

So why have it as a loan at all? I graduated in 2008 so I am on the old scheme where I pay 9% of all salary over £15 000 until the loan is paid off. Like many others, I have stopped thinking of the loan itself ages ago, and simply consider it an extra tax.

As for actually paying it off, I work as an engineer so I'm not badly paid, but assuming my pay increases with inflation only I simply will not pay off the loan until I am 67 (also assuming I don't take time out of work to have a family).

I don't have a problem paying for my education, thats absolutely fine with me, but the way it is being presented is a problem. Asking people to start their working lives tens of thousands of pounds in debt seems completely ridiculous. When a person is in £40k of debt from uni, what difference does the extra £1k from a credit card matter?

Having said that, there is a bit of me that gets annoyed at the outrage because in my situation, right now, I have less money in my pay packet each month than I would under the proposed system.

antonia1

Kim_Beardsley wrote: »

I agree with this point. Many degrees are a pointless waste of time and just an excuse to go to Uni. Some of my sons friends have 8 hours of lectures a week, the rest is private study. I for one would not like to be paying massive fees for 8 hours lectures a week. Also perhaps Uni hours should be like those of employment with perhaps 4 weeks a year holiday. Increase the hours, reduce the holidays and then you may be able to knock off some time from the overall time spent at Uni thereby reducing debt.

I agree a bit. My 5 year degree could have been done in 4 years because first year is pretty much a waste of time. However, holidays are VITAL to students who have to work to pay for food when at uni. Student loans (and I had the maximum) cover rent, bills and probably half food for the time at uni. For students whose parents cannot afford to help, they need to work either part time all year or full time during the holidays. Thus having uni like a full time (unpaid) job would mean that lots of poorer families couldn't send their children to uni.

Since starting work, I cannot believe how nice it is to have 4 weeks of actual holiday each year. That is 4 full weeks where I don't have to study, work or do anything other than relax. In fact, it is such a novelty that both last year and this I am taking 5 days of annual leave from my proper job over Christmas to work on a family business because I don't feel I need all the holiday I have.

Point of the story: to poorer students "holiday" is not the same thing as "annual leave" is to working people.

TeamForman

Very interesting thread. I have to admit that I find the jump to £9k to be the most worrying part of these new proposals especially considering that on my son's course he only had 12 hours contact time per week and some of his friends had less than that!!

My son graduated this summer and is one of those lucky enough to have found a job at a salary that means he will be making repayments from next April. He will have 9% of his salary over £21k deducted monthly BUT these sums will not be offset against his loan until the end of that tax year. This means that he will be paying compound interest on figures that he theoretically no longer owes and I find this morally unjustifiable. Once these loans go on to a commercial interest basis, the effect of this type of sleight-of-hand will be enormous and should not go unchallenged.

I'd be interested to hear how others feel about this.

Teamforman

Cardelia

rdtrdt wrote: »

I'm astonished that the "value for money" aspect has not become more prominent.

Many of my Uni lectures were in a lecture theatre containing 120 or so students. Plus there was some (inexpensive) lab work and a tutorial. This at a decent 'proper' Uni too.

This would not cost anything remotely like £6k-9k per annum. My estimate would be more like £2k per annum.

Universities must be using tuition fees to cross-subsidise their other activities (such as PhD research etc), whereas by rights those other activities should be raising their own funding - or not occurring if they cannot successfully attract funding because their research is not attractive to a funding body.

Students should not be subsidising Universities' other activities.

Why are student bodies not shouting from the rooftops about this value-for-money aspect? When buying goods or services you first decide on a price, then start thinking about the financing details. The price being asked of students would seem to be a few hundred percent higher that it should be!

Incidentally, I think the financing proposals seem reasonable. It's reasonable for students to pay "inflation+" interest, since the Govt will be borrowing long term at "inflation+" in order to finance these loans. The proposals seem reasonable to me, but the cost of courses does not. Thus, there should be opportunities for Unis to be enterprising when it come to designing innovative value-for-money quality degree courses.

I'm going to just respond to this because it contains so many inaccuracies.

Firstly, the primary purpose of a university is to carry out research. Not to teach students. Most lecturers are, first and foremost, employed as researchers who happen to do some teaching. This is especially true of "proper" universities.

Secondly, your estimated costs are way, way off the mark. If you want to know the actual cost of a degree, look at what an international (non-EU) student will be charged. Their fees are often upwards of £10,000 a year, and that's just for humanities degrees which don't have practical sessions or large amounts of contact time. Even the University of Buckingham (the UK's only true private university) charges £9k a year, so I have no idea how you think a university can charge as little as £2k a year and survive. Oh, and lab work is "inexpensive"? Good luck trying to explain that to a vice-chancellor!

Thirdly, it is actually research grants which subsidise undergraduate tuition. The current system, where universities get all their teaching income from the government, does not provide enough income to enable universities to fully operate their teaching activities. Undergraduate students, especially EU students, are subsidised by other forms of income - I presume you find this as unacceptable as you found the thought of it being the other way round?

Fourthly, a university education is not a commodity. As someone who is involved in educating students, it really makes me despair to see education being thought of like this. Studying for a degree is nothing like buying goods or services. You have to earn the right to get a degree, you can't just pay your £3k a year and expect to be handed everything on a plate.

If you want to consider the value for money aspect, then you have to look at what added value a degree will give you over the course of your lifetime. Trying to look at it from a point of view of "I only have 3 hours contact time a week therefore my degree is poor value for money" is pointless. University study is much, much more than trying to get as much of a textbook spoon-fed to you by a lecturer so that you can cram it in the night before an exam before promptly forgetting it and moving on to the next topic. Anyone who thinks like that shouldn't be at university.