What this site has called the Great Conservative Student Panic is in full cry. Downing Street, Ministers and Tory MPs are alarmed that only 18 per cent of 18-24s voted Conservative last June, according to Lord Ashcroft’s survey of 14,000 people on election day. Philip Hammond asked Tory MPs for policy ideas to reduce student debt at last week’s meeting of the 1922 Committee. And the Sunday Telegraph claims today that Ministers are pondering reducing the rate of interest on student loans, and making an announcement to that effect at Party Conference in a few weeks’ time, or in this autumn’s Budget, or both.
Readers will already have spotted at least two snags. The first is that only a third of that age group go to university, and so wouldn’t gain from any easing of the student loan system. They are more likely to benefit from the transfer of resources from the university sector to the technical one, which the ConservativeHome Manifesto called for three years ago, and which the Conservative Manifesto itself has now promised. The second is that the Tory election performance among the 24-35s was almost as bad as among the 18-24s, with support rising to only 22 per cent: indeed, the Party won only 30 per cent among the 35-44s. The main explanation for this has nothing much to do with student debt, but with the other factor that the Chancellor identifed at last week’s meeting: housing.
None the less, let us put aside other factors that affect students – such as the bad deal that some are getting from the cartel that soaks them for £9000 a year, regardless of the quality of the university or course in question – and focus on what the Government should do, if anything, about student financing and debt. As we note above, roughly a third of young people are in higher education. Indeed, record numbers of 18 years olds were accepted into University last year. Applications are at their highest-ever recorded from the areas least represented in higher education. So whatever the debt burden on young graduates may be, it is not deterring very large numbers of young people from going to university, including a higher number from disadvantaged backgrounds.
Perhaps this is because they have worked out that the method that funds them is less a student loans one than what Martin Lewis has called a graduate contribution scheme. In other words, those loans are subsidised. Graduates repay nine per cent of everything earned above £21,000 after graduating – which means that they repay nothing if their earnings are below that level. Repayments stop after 30 years. What is repaid therefore bears no relation to the size of the debt, and the rate of interest is, in Lewis’s words, “often irrelevant”. As he points out, one student with £20,000 worth of debt and another with £1 billion would make exactly the same annual repayment of £900 on a £31,000 salary.
Yes, the Government should consider changing the formula that that sets the interest rate on student loans at the retail price index level of inflation plus three per cent. But there is a question about timing. Any rushed announcement at Party Conference or in the Budget would undoubtedly look like a victory for Jeremy Corbyn – and, let’s face it, would be. A response to a review, reporting shortly before Brexit takes place, would smack less of fear. It is true that the election may come sooner than 2022 – which is why a date before March 2019 for any review would be prudent – but the arrangement with the DUP currently looks durable. The Government is set to get the standing committee changes it wants next week. This Commons looks stable, at least for the time being.
So Ministers shouldn’t supplement the Great Conservative Student Panic with a Great Conservative Conference Panic. But one matter they should task any review of student funding to probe is costs while at university as well as afterwards. George Osborne scrapped maintenance grants for poorer students in 2015. On ConservativeHome, Salman Anwar has suggested breaking the link between student maintenance costs and parental income by introducing a universal maintenance loan. If the Government wants to cheer up the present generation of students, this wouldn’t be a bad way of going about it.