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Student Finance 2012 changes – it’s time to tackle the ignorance

May 26th, 2011 by Martin Lewis

Student Finance 2012 changes – it's time to tackle the ignorance

Student Finance 2012 changes – it's time to tackle the ignorance

Update Note 13 June 2011: Now see the new Student Finance 2012 the facts guide (direct link www.studentfinance2012.com

I had a good meeting yesterday with David Willetts (Minister for Universities and Skills) and Simon Hughes MP (Advocate for Access to Education). While I’m not the greatest fan of the 2012 changes, I do believe a chunk of the widespread fear is based on a lack of understanding, rather than the facts. Therefore, it’s crucial that we ensure people really do understand the good and the bad effects of the changes.

So, I’ve taken a decision to accept these changes are going to happen (though I will still lobby on the areas that aren’t fixed e.g. early repayment penalties) and leave the wrangling for others – while I get on with starting to explain how the new system works.

When we recently launched the All Party Parliamentary Group on Financial Education, amongst the other challenges I put to the 100+ MPs there, one was to ensure, "no students go to university under the new system, without understanding how the borrowing works" (watch the Financial ed. challenge to MPs video).

Yesterday’s meeting was to discuss options on exactly how to do that. Simon Hughes has been working on the wider picture of access for a while, and I’m pleased to say the Government are very receptive to the plans.

Major change needs major communication

The last time there was a sea-change in the way student finance worked was in 1998. Then two things happened – tuition fees were brought in and the loans changed from the old ‘mortgage style’ to the new ‘income contingent system’.

The media then concentrated on the contentious tuition fee issue as it was the better story – little was said about the change of loan repayments, which meant that rather than needing to repay the whole loan over 60 months once you hit a threshold, you simply repay 9% of everything you earn above £15,000 each year through the tax system – a much more gradual and less harsh system.

Yet now we’re back in the same boat. We have a host of changes and of course yet again, the focus is all on the rise of the cost of tuition fees and the other changes, some good and some bad, have primarily all been ignored (see my old Student loan argument is dangerous blog).

But, most people haven’t got a clue of either and there’s widespread myths and ignorance (e.g. see Will new student loans stop you getting a mortgage? blog) and while I’m at it let me clarify the answer to the most common question I get asked on this subject – it will ONLY affect those starting university in 2012 and beyond, if you are already a student by that time, you will continue on the current system (see the Student Finance guide for more).

We need to change the language

I’m in the middle of writing a new top 10 things everyone needs to know about the changes guide, so I’m not going to go overboard on explaining the new system here in a hastily written blog.

Yet, there is a big confusion between the size of the fees and loans and the actual cost of education. For example it is possible to get £9,000 tuition fees and yet have absolutely no cost because you never earn over the threshold to begin paying off your loan.

The whole system of student loans simply doesn’t fit into other lending or financial categories, it needs its own new language to deal with it to make sure it’s clearly understood.

What is needed is for students and their parents to understand the cost of the system and its impact – not just the level of fees – for that we need tools, effective communication and more. Only then can they truly decide whether it’s worth it.

At yesterday’s meeting I’m pleased to say there seemed to be a commitment to ensuring this will happen.

Related Past Blogs

>Universities must educate students over the new loans
>Student loans the seven deadly sins of early repayments
> Argument over student loans could kill the next generation of students


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Posted in Education, Money, Politics, Uncategorized | 7 Comments »
  • http://www.facebook.com/people/Gordon-Smith/689595651 Gordon Smith

    The facts are that despite the increase in funding that English Universities have been enjoying there has been a huge decrease in the teaching budgets! Where is the money going? Chancellors, vice chancellors?? It is sad that  the very politicians and public figures that have enjoyed free higher education and are benefiting from it are now cutting the ladder for the poor in society to reach the same position they are in and then telling us that we don’t understand and it isn’t as bad as it looks. 

    Universities are to blame as well. Too many “Forensic science” and “media studies” degrees that are of no value for gaining employment in these fields but the government has been funding due to misleading of prospective students. 

    We are turning into an American system of higher degree finance and the American system is to be despised not lauded and copied!

  • http://twitter.com/sf_consultant Blair Campbell

    Very good to see someone in the media getting to the heart of the issues, including mortgages (key parental concern) and early repayment charges (key moral concern).

  • http://1500loan.blogspot.com/2011/05/resources-for-15000-loans.html 15000 loan

    I’ll post the same information to my blog, thanks for
    ideas and great article.

  • http://twitter.com/libgysig libgysig

    I’m very interested in what’s going to happen to graduates who want to study medicine.  I’m studying a biomedical science degree with the intention of going on to study medicine. I could pay the cost of the first year up front if I needed to, but if the NHS withdraw the funding for years 2-4 and if the government don’t allow any sort of loan for graduate medicine students (given that profressional development loans have now all but dried up) then I will be priced out of medicine. There’s a big gap between £9,000 and £36,000.

  • Anonymous

    Naive of university, as I am of a generation where this opportunity wasn’t readily available to all (although of this I have no qualms), I have two sons who will progress through this system. One of my frustrations is, why can’t the period of study be condensed? This would reduce costs of study and maintenance. One further frustration is that the government is a sheep in wolf’s clothing, keeping our young in education longer is not necessarily for their benefit but helps fill thousands/millions of work years where either our young or those they replace would be placed on the unemployment market. Instead we as parents or our children themselves are paying to create employment for others and saving the government a further huge benefit bill.

  • Anonymous

    Student loans are the same as they were in 1998, the same as they will ever be. Letting the rich get richer and the poor just get poorer. The system fails those from poorer backgrounds. Mummy and daddy will always be there to pay off the rich kid’s student loan debts.When the poorer students go on to graduate and have families of their own, this is when the repayments start to dent their family income. No provision is made for expendture. No rich mummy or daddy to help people in this situation, a joke!

  • Anonymous

    Martin, could you please explain why a highest rate of tax for an ex studentof 41% when they reach the magic 21,000pa is in any way fair? Take out rent from your income (not much hope of a mortgage or if you’re lucky enough to get one, thanks to the outgoings of your loan it’s unlikely you’ll get the best rates), rising year on year and probably no security of tenure and on top of that a projected pension age of 77 according to some, so people in a job, even in their early 20s should be looking at pension provision. IMO you have fallen for the oldest trick in the book – salami tactics – increased fees aren’t going to be a problem, people with degrees earn more anyway (although with a projected debt of £48K without interest and only an average increase in life wages of £100K for those with a degree, a degree looks pretty marginal for a lot of people). Less people should go to university anyway – despite the fact that unemployment rates for under 20s is running at 20% at the moment even though successive govt have pushed our young people into university to massage those figures. Looking at one aspect in particular, no the added burden isn’t perhaps such a big deal, looking at the whole issue of youth unemployment, tax take on our young people, renting/mortgage costs and the need for pension provision, the student tax is grossly unfair and I’m afraid it seems as if they have conned you into giving it a veneer of financial respectablity. (Why doesn’t the gov want to call it a student tax if that is what it is? Because such a high tax rate on a below average wage is outrageous – so they want people to think of it as a loan, except when it comes to repaying it – when suddenly it makes more sense to see it as a tax )