Update: 6 July 2015: Sadly, since I first wrote this blog, the likelihood of the Government freezing the student loan repayment threshold – and thus retrospectively increasing the cost of student loans – has increased.
There have been more mutterings from policy wonks, plus the former Minister for Universities (though no longer an MP), David Willetts, – the one who introduced the system – has written that he thinks a freeze should happen. This is a particular disgrace as it was him who promised it would rise in the first place.
This is a fast-moving subject, it could change as soon as this week’s Budget: updates on it and any action will go in my weekly email. Also, watch my BBC Daily Politics rant on it from Friday 3 July 2015.
Let me be plain – I am writing this blog to put down a marker to the Government. If it decides to renege on its promise to uprate the £21,000 student loan repayment threshold, it will have mis-sold university education to many students, betraying both them and me personally and I will do all I can to organise protest.
It is thankfully only a mooted idea so far, yet I’m worried that it is quickly gaining traction. So I want to bash out a quick explanation…
- What is the uprating of the £21,000 threshold?
Students in England who started university in or after 2012 will repay 9% of everything they earn above £21,000 (pre-tax salary) once they graduate. The first repayment will be in 2016, then from the following year the repayment level is due to increase in line with average earnings. This is very important – if it doesn’t increase, in real terms students (ie, factoring out inflation) will be paying an ever increasing proportion of their monthly income on student loans.
For a more detailed explanation see my 20 student loans mythbusting guide.
- Why it might be changed
It’s pretty clear the launch of the 2012 fee system has been a bit of a disaster for the Treasury. The calculations on how much people would repay in the 30 years before the debt is wiped were wrong – far fewer students will repay in full than the Government thought (though interestingly, I and many others were saying this from the start). That means the gain to the Treasury is much less than thought – as a debate in the Commons yesterday showed, it loses around 45p for every £1 lent out.
Freezing the threshold in 2017 would help recoup some of this and indeed as this Independent article shows, it is seriously being mooted – thankfully only by Government advisers, but that’s bad enough.
And, I’ve heard rumours that off-the-record some have said:
"If we do this we’d get bad press for one day, then it’d be over."
So this blog is for me to say:
"I will do my damndest to ensure the noise and bad press goes on and on and on."
- Why I am so against it
This seemingly small change actually has a huge impact on student finance. All the maths behind the explanations of what will happen to university students is based on the promised uprating.
There is also a principle here – while a Government is free to change how student finance is done for future university starters it should never retrospectively change things (if it only froze the £21k threshold for new starters, with a decent notice period, while I wouldn’t like it, I wouldn’t be protesting). Retrospective changes haven’t happened before (well there are some arguments that the sale to Erudio has resulted in such changes, but nothing as fundamental as this). It shouldn’t happen now.
The terms that you get at the time of the loan should never be negatively changed (or even positively changed without giving you the option to opt out). This would be a negative change, so it is wrong.
- Why I feel honour bound to personally intervene
In 2011 I was asked by the Government via the then universities minister David Willetts to head the Independent Taskforce on Student Finance Information. I "ummed" and "ahhed" about it as while I didn’t support the change to student finance in 2012, I was very scared that the huge myths and misunderstandings about it would wrongly put many students off going to university, especially those from non-traditional backgrounds.
So I agreed. However, my condition was that the taskforce had to be independent of Government and that it had to include the National Union of Students. The job wasn’t to sell the changes, it was just to ensure people understood them. As part of it, I wrote guides like 20 student loan mythbusters and created the student finance calculator to show the real impact of the changes. I believe we did a great job and certainly decreased the fear for many students and their parents – without softening the increased cost of the changes.
Repeatedly during the process (and since) I asked for assurances of the continuation of the uprating from 2017, and was promised it directly – it formed a major part of the calculations and explanations I gave out. I was also promised there would be no retrospective changes for anyone under the 2012+ system (though I did still continue to warn people that changes are always possible).
Thankfully there haven’t been any – yet if this is changed, I would see it as a personal betrayal and more… I had fantastic feedback on the taskforce and many said "because of your explanation, I decided to take the plunge and go" – so if there’s a chance, with hindsight, the information I gave was wrong, and people have been duped, I feel honour bound to do what I can to stop it.
- A change would be terrible news for confidence in higher education
Whether you like the way higher education is funded or not, it’s crucially important to know how it works when you start so that you can make that decision. A retrospective change of this magnitude would destroy faith in student finance and would mean many worry about future ‘unknown unknowns’.
It is always those from non-traditional university backgrounds who tend to worry about the costs most, and be most risk averse. A change like this could be hugely damaging to the hopes of broadening access.
I am not sure that my threat will move the Government greatly, but I want it to know that if it does decide to do this I will use my media presence to ensure it won’t be a "one day of bad press thing".
While it would expect radical students to protest, I want it to know that my voice too will be shouting very loudly and at the mainstream public. I hope that if this is currently just a ‘blue skies idea’ this threat will be enough to knock it off the table.
Your thoughts welcome below….
Related past blogs
- The Government has sold people out over Erudio student loans
- Student loan sell-off – should you be worried?
- 10 things about work, life and money every graduate should know
- Sheer ignorance from financial giant Fidelity on student finance
- Student loans aren’t a debt – change the name to avert a national tragedy
- "Once I’ve got a student loan, can the government change the terms?"
- Does the Adam Smith Institute understand how student loans work?
- Heading up the new Independent Student Finance Taskforce
- If no-one will fully repay £9,000 student tuition fees, how is the system sustainable?