Labour brought fees to the forefront of the election campaign, leaving many students and hopeful university attendee’s dazzled by the prospect of exiting their courses with as little debt as possible.
The system in place
In an extremely complicated system thanks to devolution, students from different parts of the UK pay varying fees. If you originate from England and wish to start university this September, you will pay £9,250 per year at all universities in Britain. If you come from Scotland and wish to attend a university that is located in your home country, you will pay nothing thanks to the Student Awards Agency for Scotland (SAAS); if you wish to venture outside of Scotland, you will forfeit your free tuition and pay £9,250 per year like English students. Universities that are located in Northern Ireland charge up to £3,925 per year for Northern Irish students. Students residing in Wales pay no more than £3,900 per year in tuition fees at every British university, thanks to the Welsh Government.
Which? estimates that a person who studied outside of London will leave university with £40,000 of tuition and maintenance loan debt. The amount of debt you pay back per year is determined by the wage you earn. There is interest on top of the loan; it is about the same rate as inflation, which is then added onto your student loan. The mechanics of how you repay your loan is seen by some as a spin-off of a graduate tax. If you earn less than £21,000, you will not be charged a penny. Once you go over the £21,000 threshold, you pay back 9% of what you earn, which gets taken off your debt. If you earn £25,000, you will pay back £360 per year, and if you earn £30,000 per year, you will repay £804. If you still have not paid off your student loan after 30 years of you graduating, your debt is written off.
Why our current system is a failure
Now that the basics are out of the way, let’s get down to business. There are many issues with the current system and a complete overhaul is desperately needed. In 2014, the Institute of Fiscal Studies published a study titled ‘Payback Time?’. It concluded by stating that around 73% of graduates will not have paid their student loan back by the 30 year limit. That is a staggering number of students who would still be in debt if not for the 30 year cut off date.
The first fundamental flaw in our system is the extortionate tuition fees charged per year. As 73% of graduates do not pay the full student loan back, what is the point in the Government loaning this vast amount of money to students and universities when they know the likelihood of them getting a full repayment is less than 30%? The second hindering flaw is the 30 year cut-off point. This is essentially an incentive for some graduates to play the long game, pay as little debt as possible before the government writes the debt off. Graduates in low paid jobs will not have an extra incentive to pay their debt off and earn a promotion, as they know that they will escape without paying the debt off.
Another problem with the current system is the fixed taxation figure, which stands at 9%. This fixed fee does not allow flexibility under the unavoidable circumstance that graduates will all earn different levels of income. The fourth big issue I have with the current system is the differing fees British students pay. I understand that the devolved powers can freely decide what to spend their money on, however I feel that there is a sense of injustice in the fact that Scottish, Welsh and Northern Irish students are faced with a smaller bill than English students. In a society where more and more people are pursuing social justice at all costs, the issue of a level playing field that students across our United Kingdom are faced with when they graduate should be a higher priority.
My policy to solve the problem
Yes, I have a policy (you can call it a theory, idea or suggestion if you want), and I believe that it will iron out a lot of inconsistencies that currently exist. As it would be incredibly difficult to bring up the fees of Scottish, Welsh and Northern Irish students, my policy will be primarily focused on English students. Another note I should add in is that I will not be attempting to change the system regarding maintenance loans, even though they combine to form some of the debt a graduate is saddled with.
As I previously mentioned, English students pay £9,250 per year in tuition fees. I would bring this down to £4,000 per year, with the figure being similar to what Welsh and Northern Irish students currently pay. This figure is also large enough to make students really consider if going to university is the right option for them and not a convenient way to spend 3 or 4 years studying a course that they do not have their heart and mind set on. Reducing the fees would mean that more graduates would pay their loans back, and hopefully in a shorter period of time.
As the aim is to reduce debt, not eradicate it, abolishing tuition fees would be a grave mistake, as it encourages more students to attend university for the wrong reasons. The number of students applying to attend university would be likely to increase, meaning that universities themselves would likely have to expand their courses whilst providing a poorer standard of teaching. There is also one more vital statistic that we must all remember when thinking about the abolition of tuition fees; approximately 80% of our population did not attend university, and given the gigantic cost abolishing fees would amount to, is it really fair to burden them with this bill?
The 30 year time limit that is set for the repayment of student loans encourages graduates to play the long game and have some of their debt written off after 30 years pass. I would eradicate this time limit to ensure that all the money gets repaid, which is only fair.
Another way to ensure that the loans get repaid is the adjust the rate of repayment, which is essentially a graduate tax. As is the case with income tax, the amount you earn determines the tax bracket you are in, so I would apply this same logic to loan repayment. The first bracket would be for the £18,000-£21,000 earners. I would drop the 9% figure used across all incomes to 7% for this bracket, so graduates would pay back 7% of what they earn above £18,000, with the total sum being taken off their debt. For graduates earning £21,001- £35,000, I would up the percentage from 7 to 9. Graduates who earn £35,001- £50,000 would pay back 10% of what they earn after passing the £18,000 threshold. For graduates earning over £50,000 would have the percentage increased to 11% under my system. By slightly altering the taxation percentage to suit higher incomes, it will ensure that more graduates pay their debt off quicker. I would also issue some form of an incentive (possibly through a slight reduction in the loan they accumulated) to people who wish to pay all their loan off within 10 years of graduation.
To sum up
I understand that my policy is not perfect, and some more detail and alterations will be necessary, but I hope that it provides a platform and some kind of working idea around the reform of our current disastrous system. Even if my policy will be disregarded, it is important to start the conversation of student loan reform, as in the current broken system, 73% of graduates never pay the full debt back.