Education Bill

Memorandum submitted by Professor Steve Smith (E 41)

I am writing to you on behalf of Professor Steve Smith, Vice-Chancellor and Chief Executive of the University of Exeter. I understand that Professor Smith was asked by the Committee, at the hearing held on Thursday 3 March, to provide a written response to a question about graduate debt and repayment under the proposed new fee regime at the University of Exeter. I am responding on his behalf whilst Professor Smith is overseas on University business.

As Professor Smith stated during his oral evidence session, the University has estimated that the total debt for the typical graduate will be within the range of £30-50,000, at a tuition fee level of £9,000 per annum, taking into account interest payments and accommodation costs, where applicable. Although the typical fee for undergraduates, subject to OFFA approval, will be £27,000 for tuition fees over three years, students from less well-off backgrounds will benefit from a range of fee waivers and bursaries offered by the University. Also, the new £150m National Scholarships Programme will be targeted at bright potential students from poor backgrounds and will guarantee to students benefits such as a free first year or foundation year. Students from families with incomes of up to £25,000 will be entitled to a non-repayable maintenance grant of up to £3,250 and those from families with incomes up to £42,000 will be entitled to a partial grant. Maintenance loans will be available to all eligible full time students irrespective of income.

Regarding repayment, as you will know, the guiding principle of the new system is that students will not have to pay tuition fees up front , and that the costs of higher education are not so much a debt as a levy on gross income over a certain level. Graduates will only repay the cost of their education when they are employed and earning above £21,000 per annum . Repayment rates on loans will be at 9% of salary over £21,000. Debt will be forgiven after 30 years. It is estimated that only 30% nationally will repay the whole fee, partly because of the increased threshold for repayment.

At the University of Exeter we have modelled the actual repayments a graduate would make against fees levels of £6, £7k, £8k and £9k under a variety of different salary scenarios. I attach the results of this modelling to this letter for your information. Please note that these figures only cover tuition fee costs and assume no RPI or wage inflation over the 30 year repayments period in order to provide a consistent model.

March 2011

Tuition Fee

Repayments amounts

Fee

 

£9,000

£8,000

£7,000

£6,000

£9,000

£8,000

£7,000

£6,000

Total debt

 

£27,818

£24,727

£21,636

£18,545

£27,818

£24,727

£21,636

£18,545

 

 

 

 

Total repayment:

 

Avge "annual graduate contribution":

 

 

 

 

Salary

 

 

 

 

 

 

 

£0

£0

£0

£0

£0

£0

£0

£0

£0

£15,000

£0

£0

£0

£0

£0

£0

£0

£0

£20,000

£0

£0

£0

£0

£0

£0

£0

£0

£23,000

£5,400

£5,400

£5,400

£5,400

£1,800

£1,800

£1,800

£1,800

£25,000

£9,090

£9,090

£9,090

£9,090

£3,030

£3,030

£3,030

£3,030

£30,000

£18,315

£18,315

£18,315

£18,315

£6,105

£6,105

£6,105

£6,105

£35,000

£27,540

£27,540

£27,540

£23,425

£9,180

£9,180

£9,180

£7,808

£40,000

£36,028

£31,358

£26,873

£22,556

£12,009

£10,453

£8,958

£7,519

£45,000

£45,990

£39,490

£33,021

£27,085

£15,330

£13,163

£11,007

£9,028

£50,000

£43,607

£37,348

£31,506

£26,030

£14,536

£12,449

£10,502

£8,677

£55,000

£41,714

£35,942

£30,470

£25,281

£13,905

£11,981

£10,157

£8,427

£60,000

£40,378

£34,910

£29,703

£24,711

£13,459

£11,637

£9,901

£8,237

£100,000

£35,723

£31,219

£26,834

£22,573

£11,908

£10,406

£8,945

£7,524

£125,000

£34,508

£30,229

£26,069

£21,998

£11,503

£10,076

£8,690

£7,333

£150,000

£33,720

£29,589

£25,557

£21,610

£11,240

£9,863

£8,519

£7,203

 

 

 

 

 

 

 

 

 

 

Assumptions:

No RPI or wage inflation over the 30 yr repayment period

Salary noted above is the peak salary of a graduate in their working career.

It takes a graduate 19 years (i.e. until they are 40) to reach the peak salary level above, subject to:

A starting salary of £23,000, increasing evenly to the above figures at age 40yrs.

Salaries under £23,000 stay at the level noted

No graduate takes a career break

Graduates start work at age 21 yrs

Total debt is the debt the graduate leaves University with, i.e. after two yrs of interest on the yr 1 debt and one yr of interest of the second yr debt.

Average "annual graduate contribution" is the total repayment divided by three to give the effective annual tuition charge.