Memorandum from Margaret Hodge MBE MP,
Minister of State for Lifelong Learning and Higher Education (SS
The current student support system was introduced
in 1998, following the Government's decision in 1997 to introduce
tuition fees. Lord Dearing had led a review of higher education
funding and had recommended that a contribution to tuition fee
costsat a suggested rate of £1,000should be
levied on those who benefit from higher education. We accepted
that principle and introduced means-tested contributions to tuition
fees at that level. We also substituted loans for grants and changed
the loan repayment arrangements to income-contingent repayment
(instead of mortgage-style). The system was fully in place from
The current system is based on a two-pronged
a contribution towards tuition fees
for those who can afford it: and
support for living costs through
Specific measures have been introduced to encourage
greater participation from under-represented groups in HE. As
part of the Excellence Challenge programme aimed at increasing
the numbers of young people from disadvantaged backgrounds applying
for HE, we are providing 25,000 Opportunity Bursaries worth £2,000
each over three years. In addition, there is a range of grants
for mature students and others who face high costs in completing
their studies, students with disabilities, those with childcare
A fundamental principle of our 1998 reforms,
and one which we still firmly believe, is that it is right that
those who benefit from higher education should contribute towards
its cost. Liability to pay is means-tested, with poorer students
paying nothing. The maximum contribution towards tuition fees
is currently £1,075. This represents only about a quarter
of the average costs of a course. The remaining three quarters
is met from public funds.
Students in higher education can get loans to
help with living costs. All full-time students are entitled to
75 per cent of the maximum loan, with the remaining quarter subject
to income assessment. The rate of the loan varies according to
whether the student lives at home or not; there is additional
support for those in London. Interest is pegged to inflation,
to maintain the value of the loans in real terms only. The interest
rate for 2001-02 is 2.3 per cent. This is not a commercial rate
of interest, which would apply to any other type of loan. The
interest rate on student loans is zero in real terms because it
is tied to the rate of inflation.
Loan repayments are linked to income. The threshold
for repayment is set at £10,000, with borrowers repaying
9 per cent of their income above that threshold. This approach
allows borrowers to repay their loans at a rate they can afford.
For example: someone earning £12,000 a year would repay £15
a month; someone earning £17,000 a year would repay £52
a month. Most repayments are collected by employers as part of
Students with additional financial needs, for
example, those with disabilities or those who are lone parents
may be entitled to specific grants in addition to the loans. In
the years since 1998 we have introduced more grants targeted at
particular groups of students eg the help with the cost of childcare.
The Department is currently considering how this targeted support
could be simplified and streamlined.
Hardship Loans of up to £500 were introduced
in 1998 to provide additional targeted support for students facing
financial difficulty£25.2 million is available in
2001-02. We have quadrupled the funding available to students
through the discretionary Access and Hardship Funds, to help students
in need, from around £22 million in 1997-98 to £93 million
in 2001-02. Postgraduate and part-time students are eligible to
apply for help from the Access and Hardship Funds.
A school meals grant was introduced in 2000-01
to help student parents with the costs of their children's school
meals. £4 million was made available in 2000-01 and £6
million in 2001-02. We have also introduced a new childcare grant
in 2001-02, focusing on the actual childcare needs of the most
vulnerable students. Around £40 million is available for
childcare grants, a combined travel/books/equipment grant and
an additional dependants' grant for a first child in 2001-02.
Our 1998 reforms have brought about notable
successes in the area of higher education and student support.
Over the six years to 2003-04 we are investing an extra £1.7
billion in higher education in England, an 18 per cent increase
in real terms. As a result, the amount of publicly planned funding
per full-time equivalent student is set to increase in real terms
in 2001-02 for the first time in over a decade, and we expect
further expansion to be fully funded in the following two years.
The numbers of home undergraduates in England has increased by
85,000 since 1996-97.
The review of higher education student funding
is not about replacing a failing system. We remain committed to
sharing the financing of HE amongst those who share the benefitGovernment,
the individual and their families but in keeping with our stated
aim of widening participation, we want to make sure that students
are attracted into higher education and stay there, especially
those who have traditionally not applied to HE but who can benefit
from it. The review is still underway.
A table setting out the maximum levels of grants
and loans for 2001-02 is enclosed.
Margaret Hodge MBE MP
Student support entitlement 2001-02 for
|Type of assistance
|Help with tuition fees||Up to the maximum fee contribution of £1,075.
|Student Loan||Up to £3,815 living away from home or £4,700 in London; £3,020 in the parental home.
|Dependants' grant||Up to £2,425 for a first child or adult dependant, more for additional children as follows: £455 for under 11s; £910 for under 16s; £1210 for under 18s; £1740 for over 18s
|Childcare grant||85 per cent of actual costs during term time and short vacations, 70 per cent during the long vacation. Up to £5,724 for one child and £8,480 for two or more children.
|School meals grant||£250 for under 11s; £270 for over 11s, per child.
|Travel, books and equipment grant||£500, but must be in receipt of dependants' grant for children, or childcare grant
|Access bursary||Up to £500.
|Hardship Loan||Up to £500
|Hardship funds||According to need; usual minimum payment is £100
|Disabled students allowances||Non-medical helpers allowance of up to £10,755 a year; a general DSA of up to £1,420 a year (both reduced for part timers); Specialist equipment allowance of up to £4,255 for the whole course; actual travel costs.
|Type of assistance||Entitlement
|Care leavers' grant||For students under 21up to £100 per week to help with accommodation costs in long vacation.
|Opportunity Bursary (7,000 in 2001-02; 8,200 for those entering HE this September and 10,000 for those entering in September 2003). 25,000 in total across the three years of the Excellence Challenge from September 2001
||For students under 21 from EiC/EAZ areas only£2,000 (£1,000 paid in year one)