4 Nov 2015

Students protest over plans to increase their debts

Students protest in London against a student loans system that already costs them some £40,000 over three years, and is set to become even more expensive, especially for those on low incomes.

Organised by the National Campaign Against Fees and Cuts (NCAFC), Wednesday’s protest drew thousands of students to central London.

They were protesting against a tuition fees system which, according to a calculation by Which, will see a typical English student outside London graduate with around £35,000-£40,000 of student loan debt.

Currently any graduate has to start paying back their student loans once they are earning £21,000 or more. But in 2014 it was estimated that 45 per cent of graduates will not earn enough to pay back their debts. If this figure rises above 48.5 per cent, the government could lose more than it gained by increasing tuition fees to £9,000 a year.

In the summer budget of 2015, the Chancellor sought to raise more money by announcing that the £21,000 threshold would not go up for at least five years.

This freeze means that, as wages rise, more graduates will be required to begin paying back their loans – a move described by the Money Saving Expert website as equivalent to a retrospective increase in the cost of a loan.

A report from the Sutton Trust calculated that the threshold freeze will mean an extra £2,300 of repayments for male students and £3,300 for female students (men tend to earn more than women and it is cheaper to pay back quickly than accrue more interest by paying back in small amounts over a longer period).

Low-income students

Also announced in the budget was the decision to replace maintenance grants for living costs for poorer students with (repayable) loans for students beginning courses from September 2016.

At the time of the Budget the Chancellor defended the policy, saying the grants there was “a basic unfairness in asking taxpayers to fund grants for people who are likely to earn a lot more than them”.

Mr Osborne said he had removed the “artificial cap on student numbers” going to university, but that this could only be done by tackling the “unaffordable” cost of maintenance grants, which was set to double to £3bn over the current decade.

According to an analysis by the Institute for Fiscal Studies (IFS), the change means “students from poorest backgrounds are likely to graduate with the most debt”.

In 2013-14, 432,000 students who were eligible to apply for maintenance support, received a full grant of £3,387, according to the Student Loans Company. A further 14 per cent were awarded a partial grant.

More debt

The IFS points out that although the amount to be offered to lower-income students will be raised by 10.3 per cent, giving them more money in their pocket while studying, the change from a non-repayable grant to a loan means they will graduate with “considerably more debt than they otherwise would have done”.

The IFS calculates that “the abolition of maintenance grants, even without the other changes, will mean that, for the poorest 40 per cent of students, average debt for a three-year-course will rise from around £40,500 under the old system to around £53,000 under the new system.”

Graduates from the poorest backgrounds who end up becoming high earners will, on average, pay £9,000 more towards the cost of their degrees.