University students to pay back loans sooner and for longer in major shake-up of funding

Tuition fees to be frozen but repayment threshold to be reduced
Universities could see the introduction of both student number controls and minimum entry requirements
PA Wire
Anna Davis @_annadavis24 February 2022

University tuition fees will be frozen for three years but the threshold for repaying them will drop in sweeping reforms to higher education funding announced today.

Under a major shake- up, students will begin repaying their loans when they earn £25,000 a year, instead of the current £27,295 a year, and the length of time they must continue paying back their loan will be increased from 30 to 40 years.

This means many future graduates will still be paying back their loans when they are close to retirement.

Freezing tuition fees at £9,250 a year will be painful for universities as it represents a significant real term cut given the rising cost of living.

At the same time the government will crack down on “mickey mouse” degrees with plans for minimum entry grades and caps on numbers.

Either students who fail to achieve EE at A-Level or those who fail to gain a Grade 4 at GCSE – the equivalent of an old C – could be barred from accessing student loans.

The proposals, which will go out to consultation, are part of the government’s response to the Augar review of post-18 education.

The reforms mark a stark reversal of New Labour and coalition government policies which sought to encourage as many students as possible to go to University.

The department for education said the changes will make the higher education system “fairer” for students and taxpayers.

It said some that currently only a quarter of students who started full-time undergraduate degrees in 2020 are forecast to repay their loans in full.

The value of outstanding loans at the end of March 2021 reached £161 billion and this is forecast to rise to half a trillion pounds by 2043, a spokeswoman said.

Tuition fees will continue to be frozen at £9,250 until 2024/25 but the repayment threshold will be reduced for new borrowers starting courses from September 2023.

A spokeswoman said this still means that graduates will not start repaying until they have reached well over the current median young non-graduate salary of £21,500.

Under the proposals, a graduate earning £28,000 would pay back £17 a month.

The student loan interest rate will also be set at RPI+0% for new borrowers starting courses from 2023/24, meaning that graduates will no longer repay more than they borrowed in real terms.

Education Secretary Nadhim Zahawi said: “Our country’s world leading universities and colleges are key to levelling up opportunity by opening up access to a range of lifelong flexible post-18 options to help people train, retrain and upskill.

“This package of reforms will ensure students are being offered a range of different pathways, whether that is higher or further education, that lead to opportunities with the best outcomes – and put an end once for all to high interest rates on their student loans.”

Higher and Further Education Minister Michelle Donelan said: “We are delivering a fairer system for students, graduates and taxpayers as well as future-proofing the student finance system. We are freezing tuition fees and slashing interest rates for new student loan borrowers, making sure that under these terms no-one will pay back more than they have borrowed in real terms. This Government is delivering on its manifesto pledges.” The plans to introduce minimum entry requirements and stop youngsters from taking out student loans if they fail Maths and English GCSEs have been attacked for potentially shutting down poorer children’s chances of going to university.

Lee Elliot Major, a professor of social mobility at the University of Exeter, said that if the plans are implemented "crudely" they will stop poorer pupils getting to university from age three.

He said: "If this is implemented crudely it will effectively be closing off university prospects at age three for many poorer children - our research shows the depressingly strong link between achieving poorly in early age tests and failing to get passes in English and maths GCSEs at age 16.

"Children from lowest fifth of family income backgrounds are five times more likely to leave school without passes in English and maths GCSEs basic skills than those from the highest fifth of incomes," he added.

"We already label a third of pupils taking English and maths GCSEs as failures - this will only condemn them further," he said.

In 2019/2020, Government data showed that 29% of 19-year-olds did not have a Grade 4 pass in English and maths.

Bridget Phillipson, Labour’s shadow education secretary, said: "After nearly three years of inaction, this meagre response shows the Government does not share the ambitions of young people and their families for their futures and the future of our country.

"Instead of looking to widen access to university education, or supporting the success of our universities, the government is slamming the door on opportunity.

"This amounts to yet another Tory tax rise on students and graduates at a time when soaring prices are already hitting people’s pockets. Labour would cut bills through a one-off windfall tax on oil and gas profits to tackle the cost of living crisis."

Sir Peter Lampl, founder and executive chair of the Sutton Trust, said: "Universities are the key route to social mobility, so it is crucial that young people who have the potential to benefit from higher education are able to do so, whatever their background.

"The introduction of any minimum grade requirement is always going to have the biggest impact on the poorest young people, as they are more likely to have lower grades because of the disadvantages they have faced in their schooling.

"We would like to see young people supported to make good choices about their futures through high quality careers advice, along with providing more high quality alternatives to traditional university study. At present there are far too few higher and degree level apprenticeships, and we need more investment in further education."

Geoff Barton, general secretary of the Association of School and College Leaders, said: "We are concerned about reports that the Government is considering preventing students who have not obtained at least a Grade 4 in GCSE English and maths from progressing to higher education, and we await further details of its plans.

"About one-third of all pupils in England fall into this category at the moment, and we need to be supporting the progression of these young people rather than restricting their choices.

"Those with the aspiration and commitment to access higher education should be helped to achieve that ambition. To do the opposite smacks of a lack of ambition on the part of the Government. It seems more like a case of removing the ladder up, rather than levelling up.

"It is important to understand that higher education is not the sole preserve of the most academically gifted.

"Many colleges and universities work hard to improve access to those who are currently under-represented in higher education and improve their life chances.

"Our understanding is that a relatively small number without grade 4 at GCSE English and maths currently study at higher education institutions. Nevertheless, denying them this opportunity will remove an option."

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