54. Memorandum submitted by Ken Richards1,
formerly Senior Lecturer, University of Wales, Aberystwyth
REFORMING HIGHER EDUCATION STUDENT FINANCE
IN THE UK: THE IMPACT OF RECENT CHANGES AND PROPOSALS FOR THE
FUTURE
BACKGROUND TO
RECENT CHANGES
IN STUDENT
FINANCE
The last 30 years or so have witnessed enormous
changes in higher education (HE) in the UK, particularly with
regard to increases in student numbers and in the number of universities,
together with radical changes in methods of financial support.
Participation in HE by students aged 18 and
19 has increased from about 5% of this age group in the early
1960s to about 36% now (see Greenaway and Haynes, 2000). As the
resources available to HE institutions to teach these increased
numbers have not kept pace, student/staff ratios have escalated
significantly: while the average student/staff ratio in 1980 was
9:1, by 1998 this had increased to 17:1. Many more university
institutions have been created with the upgrading in 1992 of former
polytechnics, hitherto regarded primarily as teaching institutions,
to universities, with emphasis on research and publications added
to their existing roles.
The inevitable consequence of this unprecedented
expansion in student numbers has been a shift in the relative
burden of finance away from the state towards the students themselves
and their families, in recognition of the perception that taxpayers
in general would not be prepared to carry the burden of -fold
increase in the cost of student support. This perception has intensified
in the light of the fact that attainment of a university degree
leads on average to a substantial increase in the lifetime earnings
of graduates, in comparison with school leavers of A-level standard,
and the perhaps surprising finding that this graduate premium
has not been significantly eroded by the vastly increased supply
of graduates. Research for the Cubie Commission in Scotland (Cubie
Report 2000b, p 358) estimated that on average male undiscounted
lifetime earnings were some £296,000 more for a graduate
than someone with just an A level qualification, while the equivalent
female figure was £267,000. Work commissioned for the so
called Russell Group of top Universities in the UK2 (Greenaway
and Haynes, 2000) suggested an even higher differential of about
£400,000. Not all graduates do equally well, however, as
evidenced by research from the University of Warwick (quoted in
Pollard 2001) which shows that while a male law graduate can expect
to earn an average lifetime gross salary of over £35,000
a year, a female graduate in agriculture can expect only £18,000.
In the last decade, the student support system
moved gradually away from means tested grants towards a complete
dependence on loans administered by the Student Loans Company
(SLC) albeit at a zero real rate of interest. In 1998, the incoming
Labour Government went further when, following the Dearing Report
(1997) recommendations, it introduced a tuition fee contribution
of up to £1,000 a year, (now increased to £1,075) which,
although far from covering the full cost of tuition, further added
to the private cost of HE. The Russell Group wished to go further
and charge top-up fees to their students, confident that the demand
for places would not be affected by the increased cost. These
days, most students rely on a mixture of family support, loans
from the SLC and banks and part-time employment during term time
as well as holidays. In addition HE institutions have funds (so-called
Hardship Funds) available to assist impoverished students.
Against this background, the Minister for Education
and Lifelong Learning in the Welsh Assembly, Jane Davidson, set
up an Independent Investigation Group on Student Hardship and
Funding in Wales (IIGSHW) which deliberated during the first part
of 2001 and presented its report in June of that year (IIGSHW
2001). During the course of the Investigation, which took evidence
from a wide range of individuals and organisations from all parts
of Wales, it became apparent that there were widespread misconceptions
about the principles of student funding, such as the belief that
all students were required to pay tuition fees irrespective of
family income, and misunderstanding of the fact that loans from
the SLC are effectively interest free in real terms. There was
also the belief, employed in the argument for the abolition of
tuition fees, that a distinction could be made between the costs
of learning (tuition fees and costs of books etc.) and the costs
of living (maintenance etc.) when in fact no such distinction
can usefully be made. The parent who pays out student child may
feel aggrieved at having to pay tuition fees as well as maintenance
but in reality the money typically comes out of the same bank
account. There is also little justification in the argument that
tuition fees breach the principle of education "free"
at the point of consumption. Economists recognise that even in
the absence, the student faces a substantial private cost of university
education in the form of income foregone whilst studying, the
opportunity cost in economic jargon. In reality, tuition fees
are just another cost to be added to this opportunity cost and
in total to be weighed against the benefits of university education
in the form of the previously mentioned higher lifetime earnings.
Another less than useful distinction was made between the economic
interest of the student and that of the parent or spouse, an argument
being made that as it was the student who benefited from enhanced
lifetime earnings, levying the cost of tuition on the parent was
unjustified. But the same can be said of maintenance payments
and as it seems highly unlikely that many families take such a
narrow view of the economic interests of the individual members,
for the rest of the discussion it will be assumed that the economic
unit is that of the family. For reasons of space the focus of
this present article will be on full time HE students under the
age of 25 being financed by parental contributions.
CURRENT STUDENT
SUPPORT ARRANGEMENTS
IN ENGLAND
AND WALES
The present system (for the academic year 2001-02)
is set out in an official booklet (DfEE 2001). Students have access
to finance from the SLC in order to pay a contribution of up to
£1,075 per annum to tuition fees. For students with parental
residual income (to be defined below) of less than £20,000
the full tuition contribution of £1,075 is covered by the
SLC. At a residual income of £19,999 no parental contribution
is required whereas for a residual income of £20,000 a contribution
of £45 is required and for every subsequent £9.50 increase
in residual income, an additional contribution of £1 applies
(the DfEE booklet quotes a figure of £9.20 rather than £9.50
although the English language web version has the correct figure)
until at an income of £29,785, the parent is responsible
for the whole of the £1,075 fee. If parental income exceeds
this figure, he/she also has to make a contribution to the maintenance
of his/her child which reduces the eligibility of the student
for the means tested element of the student loan. (A similar system,
albeit with a somewhat different threshold and sliding scale,
applies to spouse/partner contributions.)
Access to student loans for living costs, which
vary depending on whether students are living at home or not and
whether they are studying in London or elsewhere, is based on
a means test of students' own income and those of their parents
or spouses/partners, although 75% of the maximum loan is available
to all students regardless of income. Further hardship loans of
up to £500 per annum are available to students in financial
difficulty during their course, as well as access to Hardship
funds administered by HEIs.
Detailed figures for English and Welsh students
living away from home, but outside London, are given in columns
2 to 7 of Table 1 below.
Loans incur interest at the current rate of
inflation as measured by the Retail Price Index and repayment
must begin in the April following graduation provided that the
graduate is in employment and earning more than £10,000 gross
per annum. Repayments are collected through the tax system at
the rate of 9% of marginal gross income in excess of £10,000.
For employees, the deductions are made by the employer through
the Pay-As-You-Earn (PAYE) system; for the self-employed deductions
are made through the tax self-assessment system.
AN ANALYSIS
OF THE
IMPACT OF
THE SCOTTISH
REFORMS
Following the Cubie Inquiry into Student Finance,
the Scottish Executive implemented a number of changes in their
HE student support system to take effect in the academic year
2001-2002. These changes applied both to Scottish domiciled and
EU students studying at Scottish Universities but not to students
from other parts of the United Kingdom. Separate measures were
introduced for students age 25 and under and mature students over
25 but the present discussion will be confined to young students
and compares the current system in England and Wales with that
in Scotland after the reforms. The comparison will be based on
the rates for students living away from home (outside London),
and assumes that a university course lasts for three years—the
typical pattern in England and Wales, although Scottish courses
generally last for four years.
The main features of the new Scottish system
4 are:
1. The abolition of up-front tuition fees
(henceforth to be paid to HE institutions by the Student Awards
Agency for Scotland) to be replaced with a flat rate contribution
of £2,000 to be paid after graduation into a Graduate Endowment
Fund to be used in future for assistance to students from lower
income families. This £2,000 is to be paid by all graduates,
with certain exceptions, irrespective of graduate or parental
income, which contrasts with the Cubie recommendation that the
amount of the payment be £3,075 (then equivalent to three
years fees) and that it be payable once the graduate's income
had reached £25,000. The exceptions to the £2,000 payment
include students such as lone parents, disabled or those studying
for an exempt course such as a HNC/D course. The full list is
given on page 13 of the document referred to in Note 4.
2. The introduction of means-tested bursaries
to supplement the existing loans, with an increase in the total
support package available for the lowest income groups in bursary
and loan combined.
3. A reduction in the loan package available
to students from well-off families, to a maximum of £750
per annum in the first two years.
The essentials of the Scottish system are summarised
in columns 8 to 11 of Table 1 above for a range of parental residual
incomes from £10,000 per annum to £65,000 per annum
and refer to annual amounts. Figures in columns 2 to 7 refer to
the current England and Wales system and are also for annual amounts.
Columns 12 to 16 seek to compare the two systems
over a three year period by in effect asking the question how
a student from England or Wales would fare in aggregate terms
over the three years under the Scottish system. The impact of
the abolition of fees, introduction of bursaries, changes in the
maximum size of loan and payment of the Graduate Endowment contribution
are shown separately in columns 12 to 15, and the cumulative effect
of all the changes is shown in column 16.
As can be seen from Column 12, the effect of
abolishing fees and introducing the Graduate Endowment is to make
richer students better off by £1,225 whereas the poorest
students and their families—those with residual incomes
of £19,999 and below—are substantially worse off since
they now have to contribute £2,000 whereas previously they
were exempt from fees. Moreover the total loans available to them
for maintenance have fallen (col 14), though they can access a
further loan of £2,000 at the end of their course in order
to pay the £2,000 flat rate Graduate Endowment contribution.
However, the effects on low income families are ameliorated by
the granting of a maximum bursary of £2,000 a year, a total
of £6,000 over three years. The overall cash flow effects
over three years are shown in Column 16.
This shows that in terms of cash flow, the combined
effect of the changes is that students from poorer backgrounds
are better off, though this is because the introduction of bursaries
more than compensates for the extra costs associated with the
Graduate Endowment. It must also be remembered that the quality
of the support is better at the lower end as it replaces an element
of loan with non repayable bursaries, although students from poorer
families in England, Wales and Northern Ireland can already apply
for bursaries from Hardship Funds administered by Universities
before they arrive and also obtain hardship funds during the course
of their studies. In principle if a student currently receives
non-repayable hardship money of at least £500 a year for
three years, he or she would be worse off under the Scottish system.
At the income level of £20,000 the student
is neither better off nor worse off but as income increases, these
students become marginally worse off until at £25,000, students
are worse off in cash flow terms by £87 over three years
in terms of support from the state. It is difficult to believe
that a system which treats these students as being deserving of
bursaries should actually reduce the total public resources available
to them over three years. This surely must be an unintended and
unforeseen outcome of the reforms.
WEAKNESSES IN
THE STUDENT
SUPPORT SYSTEM
IN ENGLAND
AND WALES
Although we have seen that the Scottish reforms
can be criticised on a number of counts, the system in England
and Wales is also defective in several important aspects, and
several of these defects still apply even to the reformed system
north of the border. Particular mention can be made of (i) the
concept of residual income which is used to means test parents
for tuition fees in England and Wales and access to loans by their
offspring in Scotland as well as England and Wales, and (ii) the
present arrangements for repaying the loans. There have also been
problems in practice in England and Wales with the payment of
tuition fees, since universities reported to the Investigation
Group considerable problems encountered in chasing up unpaid tuition
fees and the effect this had on their already over-stretched budgets.
(i) Residual Income
The rationale of the system is to relate access
to loans to ability to pay of the parent or spouse through use
of the concept of "residual income". This is a very
poor indicator of ability to pay for a number of reasons:
1. It ignores the existence of wealth. A
family with the same income as another but with wealth of say
£200,000 in the form of investments, whether income yielding
or not, has obviously the greater ability to pay, but this is
entirely disregarded.
2. It ignores certain categories of income.
In one family the sole breadwinner may pay tax and national insurance
contributions on his or her earnings though these are not allowable
as deductions for purposes of calculating residual income, the
full gross income being counted. In another family, one partner
may not be working but have say £150,000 of investments in
tax free form such as Tax Exempt Special Savings Accounts, Personal
Equity Plans or Individual Savings Accounts which are totally
ignored in computing the parental contribution. Assuming a modest
return of 5% of the total fund, an estimated income figure of
£7,500 is therefore totally disregarded. Furthermore financially
astute or well advised families may get most of their "income"
in the form of capital gains which are not only tax free up to
a figure of £7,500 per annum but also entirely left out of
residual income.
3. A limited number of outlays such as pension
contributions are deductible for the purpose of calculating residual
income. The inequity of this deduction can be seen from the following
hypothetical example. If one parent (Parent A) saves for retirement
through a pension contribution and another (Parent B) by investing
in a bank or building society account, their treatment in calculating
residual income is markedly different. Parent A gets tax relief
of between 22% and 40% of his/her pension contribution, has the
value of the contribution deducted from residual income so that
s/he has to contribute less, and any future income accruing from
the pension fund will also not be taken into account. By contrast,
Parent B gets neither tax relief on his/her savings nor a deduction
from residual income, whereas any future interest accruing on
the deposit account is counted as residual income. The logic—or
absence of logic—of allowing deductions from gross income
can be illustrated by the case of Mortgage Interest Relief At
Source (MIRAS). Prior to April 2000, mortgage interest on the
first £30,000 of any loan was also deductible in calculating
residual income but this has now been disallowed with the consequence
that parents are both worse off financially and find themselves
liable to extra parental contributions to their children's education.
If MIRAS were to be restored, parents would find themselves both
better off and liable for a lower parental contribution. This
is surely illogical in a system which tries to ensure that better
off parents make greater contributions.
4. The calculation of residual income makes
no allowance for how earned income is distributed between two
parents. A family where both parents have gross incomes of £20,000
each is, ceteris paribus treated in exactly the same way
as another family where the main breadwinner earns £40,000
and the other partner nothing. On current income tax rates, the
latter family will however pay nearly £2,500 more in income
tax than the two-income family.
5. The contribution threshold for residual
income at which point tuition fees start to be levied for parents
differs from that for spouses or partners: £20,000 compared
to £17,200.
6. The parent's residual income is based
on gross income before tax while the assessment of that of the
student himself or herself is after-tax income.
(ii) The Loan Repayment Arrangements
As mentioned previously, loan repayments must
start in the April following graduation provided that the graduate
is earning at least £10,000 gross at that time. Provided
any required repayments have been made, all outstanding debts
are cancelled in the event of death, permanent disablement or
on reaching the age of 65. It means that someone earning not a
great deal more than the minimum wage must start repaying his/her
loan at the rate of 9% until the debt is cleared. Someone earning
£11,000 all his/her life, and with a debt of £9,000
could be paying for well over 100 years were it not for the fact
that all debts are cancelled at the age of 65.
SUGGESTIONS FOR
REFORM
These suggestions are intended to simplify the
system, reduce the documentation required by students and parents
applying to local authorities for support and relate contributions
more precisely to their ability to pay. Moreover, they reduce
the burden of loan repayments for graduates on modest incomes
while improving the cash flow of universities.
1. Use family financial wealth as an additional
indicator of ability to pay. Parents would be asked to estimate
their wealth in the form of investments, shares, deposits, property
for rent etc and be presumed to have a net-of-tax income of say
5% from that wealth. (There is a precedent in the case of Social
Security for example in the assessment of the contribution required
for purposes of residential care where, irrespective of actual
income received, the applicant is deemed to have an additional
income of £1 a week for every £250 of capital owned
between the amounts of £10,000 and £16,000 which is
the equivalent of about 21% per annum after tax. If the government
can condone such an unrealistic figure in this instance, surely
a more reasonable figure of 5% should be accepted with alacrity).
No entries would then be required for actual investment income,
which at the moment requires considerable documentary evidence,
a reform which addresses the first two criticisms noted of residual
income.
2. Disallow pension contributions, which
are a form of deferred income and are already granted tax relief
at up to 40% of their value, as deductions from gross income.
3. Base residual income on family income
after income tax. (It is possible to deduct National Insurance
Contributions (Nics) as well, but this may add to the complexity
of the scheme). Administratively it is quite easy to construct
equations which Local Education Authorities could use to calculate
equivalent net-of-tax income from gross income. For example, for
the fiscal year 2001-02 income tax system, gross annual individual
earned incomes in the range £6,416-£33,935 (effectively
in the basic rate tax band after deducting the personal allowance)
exhibit the following approximate relationship:
Yd = 0.78Y + 1223
Where Yd is income after tax and Y is income
before tax.
For example If Y = £20,000, Yd = £16,823
or if Y = £25,000 Yd = £20,723
Equivalent equations can be calculated for higher
incomes.
4. Reform the calculation of parental and
spousal/partner contributions by:
— Making the thresholds and sliding
scales the same for both types of contributor.
— Abolishing the discrete step of £45
at the starting point for contribution since it serves no apparent
purpose.
— Raising the threshold to a net of
tax income of £20,000, which corresponds to a gross income
of about £24,000, and increase the implicit sliding scale
"tax rate" from just over 10.5% to 20%, which is equivalent
to just over 15% in terms of gross income. The rationale for doing
this is to simplify the system by taking some parents out of the
calculations, reducing the contributions required from parents
with a gross income of less than about £30,000 and increasing
the contribution from those on higher incomes.
The present system can be approximated by the
equation:
C = 0.10526Yr-2060.26 Yr ~ £20,000
where C is Parental Contribution and Yr residual
income.
As residual income rises by £1 the contribution
rises by £0.105 or if Yr rises by £9.50 C rises by £1,
so the implicit "tax" rate is 10.5%.
With the suggested reform, the Parental/spousal
contribution in pounds would be given by
C = 0.20Yn-4000 Yn~£20,000
Where Yn = Yd + imputed investment income
This reformed system is simpler, easier to administer
and understand and fairer to lower income families.
5. Reform the repayment schedule.
I have constructed a loan repayment model (illustrated
in Table 2) which has the following assumptions
1. £12,000 of debt at 1 April after graduating.
2. Inflation and therefore interest rate
constant at 2% per annum compound.
3. Starting salary £17,000 increasing
by 5% compound per annum.
4. All debt is repaid at the end of each
complete year in which the annual salary exceeds the threshold
figure. (This marginally increases the repayment period compared
to the position where debt is repaid monthly.)
Table 2
NUMBER OF YEARS NEEDED TO REPAY STUDENT LOAN
| Repayment Rate |
4% | 9% |
| Threshold (£) | |
|
| 10,000 | 20 | 12
|
| 17,000 | 26 | 18
|
Table 2 shows that with the current repayment system (which
requires an annual payment of 9% of the graduate's gross income
over the threshold) a graduate with the income stream specified
will repay a student loan of £12,000 in 12 years. Increasing
the threshold to £17,000 increases the repayment period by
6 years (from 12 to 18 years) while reducing the rate of repayment
to 4% of gross income with the lower threshold increases the period
by 8 years (from 12 to 20 years). With a threshold of £17,000
and a repayment rate of 4% the student loan is repaid over 26
years—a similar period to a typical mortgage.
If student loans are to be regarded as a means of enabling
students to invest in themselves, by enhancing their future earning
power by getting a degree, then it could be argued that repayment
should be related to above average earnings. I suggest that the
starting point for repayment should be £17,000 gross income,
the average current starting salary of graduates in employment,
with a repayment rate of 10% of gross income above this threshold.
If we use the recommended repayment rate of 10% combined
with a repayment threshold of £17,000, the debt is repaid
in 17 years rather than 12 in the current regime. If it was desired
not to lengthen the repayment period compared to the present system,
then the model can be used to calculate the requisite repayment
rate, which turns out to be just over 21%.
Details of this variant of the model are shown below in Table
3
Table 3
STUDENT DEBT REPAYMENT MODEL (£)
| Year | Income |
Debt at end year | Repayment
| Remaining Debtafter Repayment | Repayment as% of income
|
| 1 | 17,000.00 | 12,240.00
| 0.00 | 12,240.00 | 0.00
|
| 2 | 17,850.00 | 12,484.80
| 182.26 | 12,302.54 | 1.02
|
| 3 | 18,742.50 | 12,548.59
| 373.63 | 12,174.96 | 1.99
|
| 4 | 19,679.63 | 12,418.46
| 574.57 | 11,843.88 | 2.92
|
| 5 | 20,663.61 | 12,080.76
| 785.56 | 11,295.20 | 3.80
|
| 6 | 21,696.79 | 11,521.10
| 1,007.10 | 10,514.01 | 4.64
|
| 7 | 22,781.63 | 10,724.29
| 1,239.71 | 9,484.57 | 5.44
|
| 8 | 23,920.71 | 9,674.26
| 1,483.96 | 8,190.30 | 6.20
|
| 9 | 25,116.74 | 8,354.11
| 1,740.42 | 6,613.69 | 6.93
|
| 10 | 26,372.58 | 6,745.97
| 2,009.70 | 4,736.27 | 7.62
|
| 11 | 27,691.21 | 4,830.99
| 2,292.44 | 2,538.55 | 8.28
|
| 12 | 29,075.77 | 2,589.32
| 2,589.32 | 0.00 | 8.91
|
To illustrate the principle, consider the first year in which
no repayments are due because income is just at the threshold.
At the end of the year, the accumulated debt has reached £12,240
(the initial debt plus interest at 2%, namely £240) while
at the end of the second year the debt has grown to £12,484.80.
As income is now in excess of the threshold by £850, at the
end of the year a repayment of 21.44% of this is made which amounts
to £182.26 and which reduces the debt carried forward to
£12,302.54. If we express the cash repayment of £182.26
as a percentage of total gross income, however, namely £17,850
this amounts to a figure of only 1.02%.
Thus although the repayment rate of 21% appears daunting,
(with monthly repayments the requisite rate falls to about 19%),
because it is levied only on income above the threshold, the burden
expressed as a percentage of total gross income starts low in
the first few years but rises to nearly 9% in the final year.
It is also possible to adapt the model to allow for higher repayment
rates at greater levels of income, a characteristic which is a
feature of the Australian Higher Education Contribution Scheme
6. Abolish Upfront tuition fees
This was Recommendation 3 of the Rees Report (Rees page 28),
which suggested that up-front tuition fees be replaced by an end-loaded
Graduate Endowment Contribution, equivalent to three years tuition
fees indexed linked for inflation, a charge which would be levied
on graduates only when their salaries reached £25,000—the
level considered by the Group to reflect a Graduate Premium.
As has been made clear earlier in this article, I have no objections
in principle to tuition fees but merely to the practical administrative
problems involved and inconvenience caused to universities in
their collection. One suggestion which might find favour without
causing cash flow problems to universities or increasing government
expenditure on subventions to the SLC is the following:
Rather than make parents liable to tuition fees once the threshold
income is reached, make them liable to maintenance instead with
a corresponding reduction in the student's entitlement to a loan.
For example at the residual income of £29,785, instead of
paying the fee of £1,075 to the university, the parent would
be required to spend the money on maintenance instead, with a
similar reduction in the student's loan entitlement, an amount
which the SLC would then be able to pay directly to the University,
along with payments already made for students currently not liable
to full fees.
No party is worse off as a result of this reform: indeed
universities are better off because they are guaranteed to receive
their fee income and do not have to expend resources in enforcing
the payment of unpaid fees. One caveat must be entered: namely
that the SLC could be out of pocket to the extent that students
did not previously take up their full loan entitlement, though
there is evidence that students who do not do so are now in a
minority. Moreover there would be an offsetting increase in the
funds available to the SLC as a result of a more effective means
test through redefining residual income, together with an increase
in the means-tested element of the student loan ( see Recommendation
five, Rees Report page 26).
An alternative scheme to that suggested by the Rees Report
would be that the Graduate Endowment Contribution would become
due in the April following graduation, and could either be paid
to the Government by the student out of his/her own resources
or borrowed from the SLC and repaid along with any other debts
accrued up to that date.
CONCLUSION
Of necessity this article has had to focus on a limited number
of issues in a very complex problem of student finance. It has
shown that although the Scottish reforms followed from the publication
of the Cubie Report, many of that report's recommendations were
not implemented. Even though a number of worthwhile reforms were
introduced, such as the introduction of bursaries and the restriction
of subsidised loans to students from higher income families, a
disaggregated analysis of these reforms show that they brought
about possibly unintended consequences. Much was made politically
of the abolition of tuition fees in Scotland, but their replacement—the
Graduate Endowment scheme—made the poorest families worse
off than before and the richest families better off. Moreover,
although the introduction of bursaries went some way towards redressing
the balance, some students deemed worthy of receiving a bursary
actually had their total support from the state reduced.
Many anomalies still remain as the Scottish system has in
common many features of the UK system. Suggestions have been made
for reform of the England and Wales system, believed to be currently
under review at the Department for Education and Skills, which
should result in better targeting of resources for student support
and an improved financial outlook for universities, without necessarily
requiring more taxpayers' money to finance them. Amending the
concept of residual income to make it a better reflection of parental
ability to pay together with restrictions on non-means tested
access to subsidised student loans should divert resources away
from better off families who do not need financial incentives
to give their children higher education, towards those from lower
income families whose participation rates are still substantially
below those of middle class households. Furthermore the burden
of repayment on graduates with comparatively low salaries would
be reduced as they would begin to contribute towards their tuition
costs only when their salaries exceeded the average starting salary
for graduates.
Universities would not have to rely on parental contributions
towards tuition fees and would have a much more certain cash inflow
than hitherto without having the extra expense and effort involved
in chasing unpaid fees. This would not preclude some universities
from charging top-up fees should they choose to do and should
the government give its permission.
NOTES
1 Ken Richards recently retired as Senior Lecturer in
Taxation and Finance in School of Management and Business at the
University of Wales, Aberystwyth. He was a member of the Independent
Investigation Group on Student Hardship and Funding in Wales.
E mail: kar@aber.ac.uk or Kenneth@pantyrhos.freeserve.co.uk
2 This Group, so-called because its meetings take place
in the Russell Hotel in London consists of 19 leading universities
including Oxbridge, the old redbrick universities in major conurbations
with Cardiff University, Wales's only representative.
3 The Loan repayment system was also changed from mortgage
style ie repayable over a fixed period typically five or seven
years to an income contingent one.
4 Taken Executive (/2001). There are a number of errors
in this document, in particular on page 7 where students with
a net parental income of £45,000 will get a loan of £821
while the entitlement to a loan of only £750 occurs at an
income of £45,461. The figures on page 11 are broadly correct.
The final line of the table is given to represent the point that
where there is more contribution than the maximum support less
the minimum loan, the minimum loan will still be paid in full.
The rate under the table on page 11, which says that parental
contribution over £2,975 will affect other means-tested allowances,
should read £3,065.
REFERENCES
Department of
Education and Employment (DfEE) (2001). Financial Support for
Higher Education Students in 2001-02, London, DfEE
Independent Committee of Inquiry into Student Finance (2000a).
Student Finance, Fairness for the Future (The Cubie Report),
Edinburgh, Independent Committee of Inquiry into Student Finance.
Independent Committee of Inquiry into Student Finance (2000b).
Student Finance, Fairness for the Future, (The Cubie Report),
Research Report Volume II, Edinburgh, Independent Committee of
Inquiry into Student Finance.
Independent Investigation Group on Student Hardship and Funding
in Wales (IIGSHFW) (2001). Investing in Learners: Coherence,
Clarity and Equity for Student Support in Wales, (The Rees
Report), Cardiff, IIGSHFW
Greenaway, D and Haynes, M (2000). Funding Universities
to meet National and International Challenges, mimeo, University
of Nottingham
Pollard, J (2001) Jobs for the BAs, The Observer, 28
January
National Committee of Inquiry into Higher Education (NCIHE)
(1997). Higher Education in the Learning Society, (The
Dearing Report), London, NCIHE.
Scottish Executive (2001). What Support is Available for
Young Scottish Students in Higher Education in 2001-02? Edinburgh,
Scottish Executive
March 2003.
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