30 May 2019

Cutting tuition fees will help rich graduates, not poor students

By

The Augar Review into post-18 education and funding in England has been published, recommending a shift away from universities and towards further education, investment in staffing, and £1bn extra for capital spending.

But most news reports have focused on one significant recommendation – bringing the maximum tuition fee level down from £9,250 to £7,500 and extending the re-payment period to 40 years, up from 30.

The logic of this is simple. At present, it is estimated that 75 per cent of loans will be written off as graduates never earn enough in their lifetimes to pay it off.

However, behind the apparently simple fix a policy which would be highly regressive.  Cutting fees doesn’t benefit poorer students. High-earning graduates are the only ones who are likely to pay off their tuition fees loan in full, so a lower rate will save them thousands in accrued interest.

Low earning graduates – whose debts are likely to be written off under the current system – will find themselves paying much more across their working lives.

Of course, there is some benefit. The prospect of lower fees and less debt will absolutely appeal to all students, particularly those from lower income backgrounds, who might be the first of their family to go to university.

But that’s not quite how it will pan out. When it comes down to it, lower fees and a longer repayment period mean higher repayments for the poorest graduates.

Tuition fees of £9,250 might be a significant psychological barrier for potential university applicants but – for the entirety of their degree and many years after – the economic impact is small in comparison with other financial strains graduates may face.

The true financial difficulty for many students comes from the limited access to maintenance funding. When I was at university – under the £3,000 tuition fees cap – I received the maximum maintenance grant available to help pay for my rent, books, food, and other, shall we say less academic, student expenses. I lived in the cheapest accommodation my university had to offer so the grant more than covered it. But living in the same cheap block, my housemate received the minimum maintenance funding which didn’t even cover the rent.

Since my graduation, grants have been scrapped altogether and replaced with loans which also have to be repaid, on top of the tuition fees. Students who cannot afford to pay their rent, let alone afford basic necessities, face enormous additional pressure at a time when they should be focused on their studies, so the Prime Minister is right when she said today that it is time to bring back the grants.

Tuition fees – like the minimum wage – are an area of policy where political parties are at risk of trying to outbid each other to win votes. The independent Low Pay Commission was set up to take politics out of the minimum wage, yet it has essentially been side-lined while politicians continue to make increasingly outlandish promises about what they believe young, inexperienced workers should be paid. Tuition fees risk heading in the same direction.

It is easy to understand why Labour and the Conservatives might want to try and outdo each other by promising lower or no tuition fees. The collapse in support for the Liberal Democrats after 2012 may have had many contributing factors, but none stand out more than their U-turn on tuition fees.

But misleading students and graduates about what they can expect to pay over their lifetimes, while gambling with universities main income stream is a recipe for disaster.

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Emma Revell is Communications Manager at the Institute of Economic Affairs