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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