Have we "miseducated a generation" about student finance?

Alistair Jarvis

Alistair Jarvis

Chief Executive
Universities UK

When the personal finance journalist Martin Lewis appeared recently on BBC Question Time, he made an impassioned intervention, criticising politicians and the media for referring to student loans as 'debt'.

While he accepted that, for students in England, it is "an increased form of taxation when you leave", he said that it "should not be called a debt, it is a graduate contribution system". The use of student finance as a political football, he said, is "an abomination" which has "miseducated a generation" about how the system works.

His comments were soon trending on Twitter and being shared widely via social media.

Martin Lewis is right. His central argument is that, what graduates repay depends not on the size of their student loan, but on what they go on to earn over their working lives after university. Graduates who earn high salaries will repay considerably more. Those who earn less after university will repay less or nothing.

The Institute for Fiscal Studies (IFS) has pointed out that only 17% of graduates – those in the highest earning jobs – will have fully repaid their loans by the time they are written off 30 years after graduation. The remaining graduates receive a taxpayer subsidy towards the cost of their degrees.

This makes the headline tuition fee price tag for undergraduate courses less relevant. Headlines claiming all students in England facing a 'debt burden of more than £50,000' are clearly misleading for students and their families.

New evidence published today confirms there is concern and confusion among students on this issue. A survey of students by Universities UK and the National Education Opportunities Network (NEON) reveals that many students are not aware that student loans differ to conventional 'debt'. It reveals that students are not aware generally that the vast majority of student loans receive this taxpayer-funded subsidy.

But does this really matter? The evidence suggests that, apart from mature and part-time students, the current student funding system in England has not deterred most young people from applying to university. Last year, the proportion of 18-year-olds in the UK applying for university was again at record levels, despite there being a population drop in this age group.

While there are clearly differing views about the current fee and loans system in England, it is important that it is, at least, understood by students and the public. The growing myths and misunderstandings around the system are now so widespread that they risk putting students off – particularly those from lower income backgrounds – due to misguided concerns around high costs and 'debt'.

While we have a system that continues to refer to a maximum fee cap – and a high one at that at £9,250 – it allows commentators and politicians to fixate on that, and enter into irrelevant debates about higher or lower tuition fees that, in reality, would have almost no impact on the amount graduates repay each month.

The most pressing issue to be addressed is whether students have sufficient money in their pockets while studying. Students tell us again that they are more concerned about meeting living cost while studying than they are about the level of tuition fees. Universities UK has called for new investment in England from the government for maintenance grants, targeted to those students who need them most.

It is clear that students need more accurate, accessible and consistent information about the costs of higher education and how the student loan system works. The survey revealed that something of a 'postcode lottery' has developed in terms of the financial advice available to prospective university students, often differing from one school and area to the next.

It is vital that the true costs are better understood by every potential student, parent and the public in general.

With the government currently reviewing post-18 education funding in England, it provides an ideal opportunity to look at this. We are calling on the government to work in partnership with schools, universities and campaign groups to simplify the information on fees and loans and to ensure it is accessible to all prospective students. Universities UK plans to bring these groups together – including Martin Lewis and MoneySavingExpert.com – to discuss practical next steps.

But, as one student said in the survey, any changes must be more meaningful than just rebranding. That, as they put it aptly, would be like "calling a cheese toastie a warm cheese sandwich".

Leave a Comment

Jonathan says:
21 June 2018 at 13:29

This is partly right. Part-time students of course have been deterred by the fee rises unlike younger, full-time students so fee support is as important as maintenance for that group.

Eoghan McHugh
Eoghan McHugh says:
1 July 2018 at 13:46

These are interesting observations made by yourself and others. Thank you for putting together this article. If tuition repayment is a sliding scale based on future success, what is the value of charging a fixed tuition rate? If only 17% of students will ever fully repay their tuition, why not lower or eliminate tuition entirely? Eoghan from https://www.yeshomebuyers.com/

lillypad says:
11 July 2018 at 13:34

I am afraid, as a parent, that we have definitely miseducated the kids. 

Sara Holmes
Sara Holmes says:
17 July 2018 at 15:16

Student Loans need to be rebranded to reflect that a loan is not debt in the traditional sense but rather a means of funding your higher education now from future earnings. That repayments are matched to earnings is a good thing - those that earn more repay a greater amount. However, we also need to make sure that courses do improve our society. Measuring the public good of education is a difficult thing, and certainly not just a case of looking at future earnings potential.

The grades u-turn caused a ripple effect throughout education – it could be catastrophic for unis

25 August 2020
From over-stretched finances to lack of space and facilities, universities are facing a perfect storm of problems.

Laptop, phone and tablet, at home studying

Covid-19 silver linings: how the pandemic has increased opportunities for disabled university students

15 July 2020
AbilityNet's Amy Low explains how new ways of working brought about by the pandemic have resulted in improvements in accessibility and inclusion for disabled university students.


Improving student retention 2020

4 Nov - 5 Nov 2020, 09:30 - 16:30

Improving student access and success in a Covid-19 world

25 Nov - 26 Nov 2020, 09:30 - 16:30