What would our student finance system look like if students had a say?
I’m sure you have an idea of the answer: No tuition fees, and generous maintenance grants funded entirely by taxpayers.
But when set against other priorities for government spending, recent work has shown a majority of students do agree they should make some contribution to the cost of their education. So, we at the University of Essex decided to find out what students would prefer in a reformed system where the overall student contribution and taxpayer contribution stayed the same. We surveyed 650 final-year students on how well they understand the current system, and gave them a series of options for possible changes to choose between.
Perhaps the greatest problem of all is that students don’t understand what they’ve signed up to.
For example, eight out of ten thought the interest rate charged during study was lower than the current “inflation + three per cent”, or didn’t know at all. This surprise premium rate on average means another £3,000 of debt on graduation. And students from high and low-income families alike all tended to want more money to live on during their studies. That was until we spelled out the price of extra support through the current loan system, in terms of debt and future repayments. Once properly informed, students don’t feel this price is worth paying. This shows how difficult it is for students to translate changes in upfront support to down-the-line obligations.
The current Department for Education-led “Review of Post-18 Education and Funding” creates an opportunity to make the system more transparent and in line with what matters most to students.
So what does our research say is most important for students?
First, they want all subjects to be treated the same. Different fees for different subjects have been mooted, either to reflect the cost of teaching or to encourage students to learn important skills. We found that students are strongly against this differentiation – even if they’d expect personally to benefit.
Second, irrespective of their own family background, students are strongly in favour of those from lower-income households receiving more financial support during their studies.
Third, students are particularly anxious about the prospect of their debt continuing to grow after they’ve graduated.
And fourth, students are not so worried about potentially still making payments in 30 years’ time. What they’re worried about is making significant payments when their incomes are low.
So, what system might best address these concerns?
We’d propose a graduate contribution system meaning that, as now, students pay nothing up front, but sign a contract to pay a constant fraction of their earnings above some threshold for a fixed period of time after leaving university.
This could collect the same amount of money, but would be greatly simplified and allow us to do away with the unhelpful and threatening language of “fees”, “loans” and “debt”.
The same money can still follow the students as an advance from the government (or a renamed Student Loans Company) to universities, but we could stop framing this as charging students fees. All maintenance support could be presented as an “allowance”. Crucially, students’ future obligations would depend only on their future earnings, and not on their parental background.
And there would be no interest rates, and no debt involved. Yes, a long payment period would be needed, but a high payment threshold could be set, and the longer-term payments of the highest earners could subsidise a lower repayment rate for everyone.
This would fix or remove the aspects of the system that are most unfair, most disliked and most misunderstood.
Dr Angus Holford is a research fellow at the Institute for Social and Economic Research at the University of Essex.
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