Thursday, March 17, 2011

Graduate debt may be much worse than feared: new findings on UK proposal

The current Conservative - Liberal Democrat governing coalition in the UK has proposed raising the cap on tuition fees to £9,000. The argument is that this deal may actually be more fair than the existing approx. £3,200 per year fees cap because students would no longer have to pay up front. At present, students pay their fees up front. Under the current proposals, no student will pay up front: students will only pay post-graduation and only if they earn more than £21,000* (and no earlier than six months post-graduation). This is thought to be more fair because students of any background may be able to afford university study: they need not have the cash (or loans) up front. The government will pay all student fees and all graduating students will then have to pay back the government at a cost.

The details are here. An excerpt:

"[. . .] Some graduates could end up paying back double their original student loans under the new fees system in England, figures calculated for the BBC suggest. The figures, by leading accountants, show that a student borrowing £39,000 for a three-year course could pay back up to £83,000 in total, in cash terms. Under the regime, due to begin in 2012, graduates will pay back 9% of earnings above £21,000 for up to 30 years.

The universities minister said the new system was fairer than the old one. He said it was "less burdensome" that monthly repayments were lower but spread out over a longer period.

From 2012, universities will be able to charge up to £9,000 per year, which will be paid upfront by the government but paid off once the student starts earning £21,000 or more. Students will also be able to take out maintenance loans ranging from £3,575 to £5,288, depending on their family's income. [. . .]"
I suspect this news will prove damaging to the Liberal Democrats in particular. They have tried very hard to argue that these new changes represent a new "fair" deal (despite the raising of the fee cap). If this deal means not only that students will pay much more for their education, but more than twice (or even three times) the government's own predictions (predictions that students will pay more under their scheme than at present) then this could be a real problem for Lib Dems in university seats.

* The £21,000 income level is £21,000 in 2015 £'s. At roughly the current level of inflation, this would be equivalent to £18,000 in today's £'s. Students currently pay back loans when earning £18,000 or more. While the government is quick to note how they have "raised" the amount students must earn before they must pay back their loans, there is a possible sleight-of-hand going on here with the argument as the "raised" figure is no more than the current figure adjusted for inflation.

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