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New student loan design would enable universal access for first time

A new report sets out clear thinking and simple steps to enabling universal access to student loans for the first time while bringing down the massive cost of the current loans system.

  • Summary report here
  • Full report here
  • Background evidence report here

University Alliance, representing 22 leading global universities for science, technology, design and the professions, is today publishing a new report, H.E.L.P. UK, A new higher education loan programme: adding to the debate on funding. The report highlights the fact that half of postgraduate students and 2/3 of part-time undergraduate students cannot currently access loans. The other major concern is that, if current projections are right, the Government will only receive 55p back from every £1 spent on student loans, costing them billions of pounds in loan subsidy over the next 30 years.

The report seeks to identify solutions through a new form of loan design (“HELP loans”), that will bring down the growing cost of student loans and offer universal access to student loans for the first time. The report also draws on new research from Ipsos MORI which shows that the proposals are in line with students’ and parents’ preferences.

HELP loans would maintain an earning threshold of £21,000 to protect low earners as well as maintaining a progressive and affordable repayment system for graduates.

Speaking about the need for universal access to student loans, Libby Hackett, Chief Executive of University Alliance, said:

“With rapid changes in technology, globalisation and increased economic uncertainty we need a higher education sector that can drive the UK’s competitiveness and can anticipate a new type of labour market.

“We need a more flexible, robust and affordable student loan system that allows for people, whatever their age or background, to be acquiring high-level skills for the changing global economy. The current student loan system is far too limiting by focusing mainly on young undergraduates studying their first degree. We want to see a lifetime loan allocation brought in that would make it possible for people to re-train and up-skill throughout their career.”

Professor Steve West, Vice Chancellor of the University of the West of England and Chair of University Alliance, said:

“We need to be creating a sustainable and widely accessible student loans system that enables us to be developing and growing global talent – that is the key to the future success of the UK. We need our higher education sector to be well resourced to do the job the UK needs it to do – supporting creativity, innovation, knowledge creation and application alongside global citizenship in all of our graduates. Our report today presents our position for engaging with further debate and consideration on this important issue.”

The report shows that the projected public subsidy on existing student loans is too high; 45% and growing. That means that for every £1 the government gives out in student loans, they will only get 55p back. University Alliance warns that this is creating an unsustainable funding system that could result in cuts to student places or underinvestment in high quality programmes.

On the issue of the sustainability of higher education funding, Libby Hackett said:

“It is projected that the government will have to allocate billions of pounds to subsidise the non-repayment of student loans over the next 30 years.

“If this is not resolved we will end up with cuts to student numbers or underinvestment in high quality programmes – both of which would damage our economy in the long run.

“We are putting forward a new model for student loans called the Higher Education Loan Programme (HELP) to add to the debate. HELP loans would facilitate universal loan access to all students for the first time, including a lifetime loan allocation to facilitate re-skilling and up-skilling in a changing economy.”

The report states that HELP loans would, for the first time, make Government loans available to postgraduate students with protection for low earners and income-contingent repayments. It also offers possible alternatives to the current undergraduate loans system by building on the postgraduate HELP model to make the undergraduate system much more sustainable and affordable.

HELP would introduce a well-designed and progressive student loan system. HELP loans would maintain a £21,000 earning threshold to protect low earners but would change the repayment rate once over the threshold. By improving the way loans are repaid it is possible to create a system where the vast majority of graduates pay off their loan more quickly and in full, bringing down the public subsidy on loans to virtually zero.

On the new HELP loan, Libby Hackett said:

“There has been very little political will to change anything about the current student loans system following the student protests back in 2010, including making changes to repayment conditions.

“We have polled students and parents and have found that they would actually prefer a student loan system that supported them to pay off their loans faster. Two thirds of students also told us they would be more likely to undertake postgraduate level study if a student loan were available to them to cover the upfront cost of doing so.

“We have checked repayment rates against median rental costs in London and take home pay to ensure these repayments are affordable for earners just over the £21,000 earnings threshold. Through a progressive and affordable repayment system we are able to help graduates pay off their student loans much faster.”

Roxanne Stockwell, Principal of Pearson College and part of the University Alliance expert advisory group for HELP UK, said:

“Finding new funding models is one of the higher education’s most important future challenges. We need innovative finance solutions that rely on reduced or no government subsidy if the university sector is to regain its freedom and be able to respond fully to the needs of students, employers and society as a whole. We welcome this report for exploring this issue and putting it on the table as a matter of serious public debate.”

Professor Alison Wolf, Sir Roy Griffiths Professor of Public Sector Management , Department of Management, King’s College London, also part of the expert advisory group, said:

“The International Centre for University Policy Research (ICUPR) at King’s College London were delighted to host the workshops that supported this project looking at the future funding of higher education. We welcome this report as a thoughtful contribution to the debate on funding higher education.”

Three things young people and parents say about fees:
• Parents are more concerned about the size of their child’s student loan (64%) rather than the terms of repayment (29%).
• By a margin of almost 2 to 1, undergraduates and parents would rather a student loan is paid back quicker, with higher monthly repayments, than longer, with smaller monthly repayments.
• Undergraduate students have mixed views on whether a £15,000 or £21,000 threshold for student loan repayments would be preferable – 44% were in favour of each option. Parents on the other hand would rather their children began paying at £15,000 rather than £21,000 (44% against 36%).

And when it comes to postgraduate taught study:
• 60% of undergraduate students feel that having an upfront fee with no loan available makes them less likely to undertake a postgraduate degree.
• Two-thirds feel that access to a student loan would make them more likely to study for a postgraduate qualification.

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For press enquiries contact Sam Jones, 020 7839 2757 or 0776 767 3982 or Hamir Patel, 020 3544 4947.

Notes to Editors

University Alliance brings together leading global universities for science, technology, design and the professions to tackle the big issues facing universities, people and the economy. Our aim is to help build a strong future for UK universities by creating a constructive and positive space for debate and new ideas.

Alliance universities are:
Bournemouth University, Cardiff Metropolitan University, Coventry University, Glasgow Caledonian University, Kingston University, Liverpool John Moores University, Manchester Metropolitan University, Northumbria University, Nottingham Trent University, Oxford Brookes University, Plymouth University, Sheffield Hallam University, Teesside University, University of Bradford, University of Greenwich, University of Hertfordshire, University of Huddersfield, University of Lincoln, University of Portsmouth, University of Salford, University of South Wales, and the University of the West of England.

About the Ipsos MORI study:
The online study surveyed two target groups from England to understand their opinions on University fees. Target 1 was made up of male and female undergraduate students aged 18-24 and target 2 consisted of male and female parents who were aged 25+ and had a child aged under 24 years old. The survey was conducted using an online panel methodology and fielded from the 7th May 2014 to 16th May 2014 to achieve 1000 completes per target (No quotas were applied in field).

1. Parents* are more concerned about the size of their child’s student loan (64%) rather than the terms of repayment (29%).
When parents* were asked whether they were more concerned about the size of a student loan or the terms of repayments, 64% felt the size of the loan was the biggest concern.

2. 60% of undergraduate students feel that having an upfront fee with no loan available makes them less likely to undertake a postgraduate degree. 66% feel that access to a student loan would make them more likely to study for a postgraduate qualification.
When students were asked what effect the up-front fee with no loan for postgraduate study had on their likelihood to undertake a postgraduate degree 60% said it would make them less likely. When asked what effect a student loan for postgraduate study would have on their decision to undertake a postgraduate degree 66% thought it would increase the likelihood.

3. By a margin of almost 2 to 1, undergraduates and parents* would rather a student loan is paid back quicker, with higher monthly repayments, than longer, with smaller monthly repayments.
When parents* and students were asked whether they would prefer to pay (or their child to pay) small monthly payments for approximately 25 years (incurring more interest) or higher monthly repayments for approximately 10 years (incurring less interest) 47% of students and 40% of parents preferred the higher repayments for a shorter time, compared to 29% of students and 21% of parents in favour of the former option.

4. Undergraduate students have mixed views on whether a £15,000 or £21,000 threshold for student loan repayments would be preferable – 44% were in favour of each option. Parents* on the other hand would rather their children began paying at £15,000 rather than £21,000 (44% against 36%)
When asked which earnings threshold students preferred, £21,000 but pay for longer or £15,000 and pay off shorter, 44% were in favour of a £15,000 threshold and 44% preferred a £21,000 cap. For parents this was 44% and 36% respectively.

*Parents who have children that have completed university, are at university or in the parent’s opinion have a child that may go to university

About postgraduate taught study
• Postgraduate taught (PGT), as opposed to postgraduate research, makes up 80% of all postgraduate study in the UK.
• 52% of people studying PGT have no access to funding or financial backing, so are forced to pay upfront either with cash or through a private / bank loan

Focusing on the Future