UK Government proposals to raise the maximum fee that Universities can charge for a year’s tuition to 9k pounds in England were narrowly passed this week. The policy itself is fairly complicated and the detail around the loan agreements themselves sounds really quite commercial; a long way away from the student loan I began in 1996.
The Government argues that despite increasing the fees, the poorest 25% of students will be better off under the new scheme. This is of course a potentially very misleading claim. To simplify the policy, only those people who earn between 15k and 21k a year after leaving Uni will be better off on a monthly basis under these proposals. Everybody who reaches the 21k threshold will end up paying significantly more. In the long run everyone will pay more! There’s no logic that can argue a loan twice the size, taken out over a longer period, with a higher maximum interest rate will cost the borrower less.
One of the most worrying aspects of this policy is that it will effectively trap students into these loan agreements for the vast majority of their working lives. There is no allowance in the policy for paying back the loan early, if a student is able to do so. David Willets has said that higher earners should not be able to “unfairly buy themselves out” of the system. If the point of this policy were just to fund higher education, then how can the government have a problem with people paying back the fees plus interest accrued early? Why trap them in the system, when they don’t need to be?
Alas this is just wishful thinking, because the majority of students won’t be able to repay 30k+ worth of debt even if the system allowed them to do so. Consider also that this debt will be taking 9% of a person’s income at a time when they themselves are starting families and will be struggling to save deposits for a house / flat, support their families, and no doubt save up so their own children can attend University. It seems to be creating an even bigger vicious circle of debt that will affect the next generation too.
It’s a huge dis-incentive for people to attend higher education. Whilst I don’t believe that University should be for everyone, the UK economy needs smart people to further their education, especially in the sciences, engineering, medicine etc. You make it harder for these people to get the education they’re capable of and you’re effectively shooting the economy in the foot.