Select Committee on Education and Skills Second Special Report


INTEREST RATE SUBSIDY

Recommendation 18: We recommend that the Government's borrowing costs should be recognised explicitly in the student support review and in future accounting practices (paragraph 77).

56. As part of the implementation of resource accounting and budgeting, the Department's accounts now include the cost of government borrowing as part of the cost of student loans. The amount included in the accounts as the cost of student loans is the sum of (a) the estimated amount which will not be recovered and (b) the aggregate value of the difference between the government's cost of borrowing (for which the current approximation is 3.5% in real terms) and the interest payable by the borrower (nil in real terms) for the period for which the loan is outstanding.

Recommendation 19: We are yet to be convinced that the Government's concerns regarding domestic and European consumer credit legislation are likely to be a significant issue in the development of future policy and we urge the Department to look into this matter further (paragraph 82).

57. The Department has discussed this in depth with DTI, OFT and the Inland Revenue. Currently student maintenance loans benefit from a low interest exemption from the Consumer Credit Act. That exemption is authorised by the Consumer Credit Directive. Under the system operated by the Inland Revenue, if the interest rate were increased so as to lose the exemption it would not be possible to comply with the requirement of the Consumer Credit Act to provide statements of account to a borrower on request. It would be difficult to continue with income contingent loans, repaid through the tax system, without the benefit of the exemption.

LOAN REPAYMENT THRESHOLD

Recommendation 23: We recommend that the repayment threshold for student loans should be raised significantly closer to the level of average earnings and should keep pace with changes in the level of average earnings (paragraph 101).

58. We welcome the Committee's recommendation that the salary threshold at which loan repayments start should be raised. As set out in paragraph 7.41 of the White Paper, we are raising the threshold from £10,000 to £15,000 with effect from April 2005. This will help make payments less burdensome particularly for those on lower or starting salaries. So, for instance, someone earning £20,000, who would pay £75 a month under the current system, will only pay £37.50 a month from 2005. The effect of raising the threshold is that individuals would pay for a longer period, but because we will not be charging a real rate of interest on the loans there is no penalty for the student associated with spreading the payments over a longer period.

FUNDING FOR UNIVERSITIES

Recommendation 24: The funding of institutions is a matter of grave concern and we are clear that any additional resource for student support should not be at the cost of investment in institutional infrastructure (paragraph 102).

59. The Government remains committed to funding higher education institutions at a level which allows them to undertake high quality teaching, research, scholarship and knowledge transfer. The White Paper set out a significant new investment in higher education, with funding set to rise by over 6% in real terms for each of the next three years, bringing funding to almost £10 billion a year by 2005-06. Additional funding for institutions' research and teaching infrastructure of over £500 million is being provided over the three years to 2005-06. In fact, funds available for research capital will increase by 77% in cash terms by 2005-06, as compared to 2002-03, and teaching capital by 185%. As set out in the White Paper, recurrent grants for teaching and research are also increasing significantly, by 26% and 38% (respectively) over 2002-03 in cash terms by 2005-06.

HARDSHIP FUNDS

Recommendation 28: The Department should give consideration to renaming the hardship fund. The language of hardship conveys an unfortunate stigma and we are concerned that it may discourage some students from making an application. Reforms to streamline and simplify the administration of such funds are urgently needed to give greater certainty to vulnerable students or those in difficult circumstances that timely and effective assistance will be provided to help them successfully to achieve their potential in higher education (paragraph 120).

60. We agree that the name of the "hardship fund" may be off­putting to students. We announced on 28 November 2002 that from September 2004 "hardship loans" and "hardship funds" will be merged into a new single, non­repayable "Access to Learning" fund.

61. The announcement on 28 November and the higher education White Paper also covered further simplifications of the discretionary system, which will benefit both students and administrators. Instead of 14 different funds, there will be just five grants from 2004-05, including the Access to Learning Fund. Student parents will now be able to apply for more of their support upfront as the current Access Bursary will form part of the new Parents' Learning Allowance from September 2003. From September 2004, Opportunity Bursaries will be absorbed within the new Higher Education Grant. And the current fee waiver scheme for part­time students will be replaced in 2004-05 by statutory fee support applied for through local education authorities. Discretionary support for part­time students will be extended to those studying a minimum of 12 credits and will form part of the Access to Learning Fund.

62. We are currently working with a group of HEI administrators to ensure there is consistency across HEIs in assessing students for support from the Access to Learning Fund and greater transparency for students in how their needs are considered. Allocations of funding are already notified to institutions in March each year to enable them to give commitments to students before the start of the academic year. Funding has also been provided specifically to improve the administration of student services within HEIs. Following the Department's Good Practice Guide on Access and Hardship Funds in June 2000, many HEIs have reviewed their processes and now operate rolling programmes which enable students to apply and receive help as soon as they need it. As part of the work to improve the operation of the Access to Learning Fund, we will be setting minimum standards for payments to students to ensure that all HEIs are responding in a timely fashion when students are in need of extra help.

RESEARCH

Recommendation 31: We recommend that the Government should continue to conduct research on the impact of the current student support regime as it affects student choices in terms of subject, institution, career path and patterns of study together with the impact of debt on graduates (paragraph 123).

63. We agree that it is important to continue to evaluate student support arrangements.

64. We are establishing a standing committee within the Department into research into higher education. This will seek to provide an overview of all the research that exists, is ongoing and is planned. Part of the role of the committee will be to identify and agree key gaps in the evidence base and the most appropriate and feasible ways of trying to fill these gaps. In addition to this committee the department also consults internally and with an expert panel of academics to inform the development of its research priorities.

65. As we said above, the Department has commissioned a new student income and expenditure survey (SIES) for 2002-03. It is our intention to conduct further student income and expenditure surveys on a regular basis (subject to funding), starting with one in 2003-04, to continue to monitor and evaluate the impact that student support arrangements are having and to inform policy development. We are also exploring with the Centre for the Economics of Education (one of the research centres the department funds) the scope for further research into the impact of student support arrangements on the levels and nature of participation in higher education.

CONCLUSION

Recommendation 32: In oral evidence Margaret Hodge offered the following comment on the student support review: "If we do not get it right, we will pay a heavy price, not tomorrow but five or ten years down the line". We concur with this view, commend the Government on its decision to undertake a substantial review, and trust that the outcomes of the review will take fully into account the considerations in this Report (paragraph 127).

66. We welcome the Committee's endorsement of the Government's decision to hold an in­depth review of student finance. The Government has certainly taken full account of the Committee's recommendations in reaching decisions on the outcome of the review. The Government apologises to the Committee for the unusually long interval between the Committee's report and this response. But as said in Mrs Hodge's letter to the Committee in July 2002, it was better to hold this response until the review was complete and we could give substantive answers to the recommendations in the light of the proposals in the White Paper.



 
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