Nathan Fogg is a freelance writer and Leed University graduate.
From Monday students will no longer have access to maintenance grants to help them through their time at university. In a change first announced during last year’s Budget, the grants (worth £3,387 per year) will now be replaced by loans. Since the rise in tuition fees to £9,000 a year students have faced an eye-watering mountain of debt after graduating, and for many this move is particularly unpalatable because it affects only those from low-income households, saddling them with more debt. Critics will make many of the same arguments they made over tuition fees, but with a higher proportion of young people from disadvantaged backgrounds going to university than ever before, original fears over the fee increase have proven unfounded.
A university degree is perhaps the best conduit for social mobility. In 2013 the then Minister of State for Universities and Science, David Willetts, said “when the Treasury looks at how you raise the long-term performance of an economy and improve productivity, having more graduates in the workforce is one of the most powerful single levers that a government has at its disposal.”
Willetts was right. The latest government statistics through 2015 show that graduates are 25 per cent more likely to be in employment than non-graduates, and on median average earn £9,500 more a year. Not only does a graduate have more money to spend as a consumer, based on the same tax year they would also pay almost double in income tax, further helping to swell government coffers. The benefits of further education to the individual and to the state are hard to overstate, to improve social mobility efforts must be focused on getting more people from disadvantaged backgrounds into university.
The government’s decision last year to lift a cap restriction on university places was a positive step in the right direction. Institutions are now free to accept as many students as they would like, a welcome move given that previously under the coalition government heavy fines were placed upon those universities which accepted more entrants than the cap limitation allowed.
Putting more people through university is a costly business however, and when he announced the scrapping of maintenance grants Chancellor George Osborne referenced a “basic unfairness in asking taxpayers to fund grants for people who are likely to earn a lot more than them”. The sentiment is crudely put, but its underlying tenant is agreeable. Why shift the burden onto the taxpayer when the student can make a risk free investment in his or herself instead?
Based on the current loan repayment rates, the median graduate who earns £31,500 a year would pay £945 of that income towards their student loans, which is 9.9 per cent of the £9,500 extra a year they are earning because they made the investment of going to university. Whilst repayments could rise for those on the new maintenance loan system it would still be a small fraction of the income graduate life has afforded them, and it is precisely because the repayment figures are so low that the government has had to scrap maintenance loans. It has been estimated that by 2042 there will be 70-80bn worth of student loans left unpaid, such a financial black hole would not be sustainable.
Switching maintenance grants to loans may be a necessity for government then, but what effects will it have? When tuition fees were raised to £9,000 a year critics feared it would put people off going to university. They were wrong. The UCAS entrance figures show that young people can spot a good deal when they are offered one. Despite an ageing population more people are going to university in the UK than ever before. In England young people are now 27 per cent more likely to go to university than in 2006 and in Wales entry rates among 18-year-olds last year increased to a record high of 28.2 per cent.
There is also an upward trend for those from low-income backgrounds. Compared with entry rates five years ago, 18 year olds from disadvantaged areas were more likely to be accepted for entry in 2015 by a rate of around 30 per cent in England, five per cent in Northern Ireland, 12 per cent in Scotland and 23 per cent in Wales. The gap in university entry rates between those from advantaged backgrounds and those from disadvantaged backgrounds is smaller than ever before, and the year by year trends suggest it will continue to narrow.
Any change to the education system must preserve the enormous benefits a university degree offers for social mobility. Whilst the scrapping of maintenance loans will likely raise discontent, there is no evidence to suggest that young people, whatever their background, are deterred from further education by the prospect of future debt. Safe in the knowledge that more and more young people will be starting a new student life every September, the Conservatives can continue to search for practical solutions to ensure the prospect of a student loan black hole does not become reality.