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Students and the spending review

11 December 2015
Jovan Luzajic

Jovan Luzajic

Senior Policy Analyst
Universities UK
HM Treasury

The spending review has certainly given those involved in higher education plenty to think about, with many still chewing over the wide range of announcements and what they may mean for universities and students.

One of the announcements was the government’s decision to freeze student loan repayment thresholds for five years. This represented a change to the previous government’s policy to increase the threshold by average earnings from 2016-17 onwards, and as noted by a number of commentators, will result in increased repayments for mostly low and middle earning graduates. In its equality assessment of the change the government has noted that there may be an effect of the change on participation of women, ethnic minorities, mature students and the disabled, but this is likely to be low.

More controversially, the government has decided that it will apply this change to all those who started a course from 2012 onwards, effectively increasing repayments above what students thought they would be paying when they started.

In Universities UK’s response to the government’s consultation we highlighted the risks that increased repayments for borrowers and retrospective changes may have on participation in higher education and in undermining confidence in the student loans system. We did not express support for either option presented in the consultation – the option to freeze thresholds for new borrowers, or the option to freeze thresholds for borrowers from 2012 onwards.

We did, however, argue that it is crucial for the student funding system to be sustainably funded. Previous government attempts to manage the costs of higher education –  through controlling or cutting student numbers or reducing funding per student – would be  detrimental for students, in limiting the opportunities available to individuals to benefit from higher education. Reintroducing these measures would be even worse for students than freezing repayment thresholds.

We are pleased that through other changes announced in the spending review, more students than ever will have access to loans: part-time students for maintenance, and those wishing to study for postgraduate master’s courses, or a second degree for tuition fee loans. These changes will increase the opportunities available to individuals to upskill and reskill, and hopefully help address some of the falls in part-time provision that have been seen in recent years. We will need to carefully consider, however, the cuts proposed to student opportunity funding and how this will potentially affect participation in higher education.

In announcing its decision the government has made it clear that they retain the right to make changes retrospectively if needed in order to retain the ‘flexibility to manage the student loan book’.

If this is the case, and confidence in the student loan system is to be maintained, the government will need to be far clearer with students on how the loan system works. This includes being more upfront and open on how loan repayments may change in the future, as outlined in the terms and conditions that students sign up to when taking out loans.

Of even more importance is the process by which parameters are reviewed, which the government has said it will do again by April 2021. Universities feel that this process should be as transparent as possible and consider affordability of study for students, of repayments for graduates and stable and sustainable funding to higher education providers, in addition to the impact on costs to government.

With increasing government spending on loans and post-2012 students beginning repayment of their loans next year, student and graduate confidence in a sustainable funding system will be of up-most importance in maintaining high quality higher education for all individuals that are able to benefit.

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