Forget £9k, it’s the £3k generation that matters (for now)

The last two weeks have been a tuition fees wonk’s dream and nightmare. The political class is more eager than it has been since 2010 to debate university funding. Every commentator and their dog has had a take on fees: good or bad, progressive or regressive, sustainable or short-term.

Much of the debate so far has focused zealously on the merits of the current tuition fee funding system: £9,000 tuition fees, the (second) abolition of maintenance grants, and the freezing of the repayment threshold. Yet the first cohort of these students only graduated in 2015. They are still very early in their careers, and the ‘repayment effect’ on their pay packets will take some time to be felt on both their incomes and the Exchequer.

But what of the slightly older cohort of millennials; those who began university study between 2006 and 2011? This ‘middle’ cohort of £3,000 fee payers – between £1,000 and £9,000, is often forgotten in debates about the impact of tuition fees.

But as last week’s IFS report shows, it is this generation – and disclaimer alert, I am an aggrieved member – who are beginning to feel the collective bite of student loan repayments. Just take a look at the dotted lines on the below graph.

The first notable feature of this graph is just how similar the ‘2011 system’ (£3000) and ‘2017 system’ (£9,000) graduates’ repayment patterns are up until graduates’ early thirties. In fact, the 2017 system repayment patterns are slightly more generous in your twenties than the 2011 system. It would have been even more so, had it not been for the repayment threshold freeze of the past few years. £9,000 fee paying graduates only really begin to feel the bite compared to their elders when they get into their thirties, while £3,000 fee payers will begin to feel their repayments ease around then.

Most significantly, this ‘peak repayment’ point for 2006-11 system middle-class graduates is, for those who entered university aged 18, right now. £3,000 graduates will today mostly be aged between 24 and 29.

The middle earning quintile of graduates from this generation will now be paying roughly £1,500 per year on average in student loan debt; the highest earning quintile nearly £3,000. Post-election polling has suggested that it is this generation of graduates, as much as current students, that turned out for Labour in June: 58% of 25-34-year-olds backed Corbyn’s party.  

There is some irony here, given that it was a Labour government who introduced £3,000 fees. But the majority of the generation in question are far too young to remember the 2004 fees controversy. In any case, Corbyn’s leadership has virtually turned Labour into a completely new party. Corbyn, of course, was one of the many Labour rebels for that infamous 2004 vote.

We know that students themselves are only partially driven by tuition fees as a voting motivator, but there is much less research into the behaviours of graduates who are paying their fees off. Given that loan repayments are a deduction from the pay slip just like any other tax, there’s good reason to suppose that such deductions irk graduate voters like any other tax burden. Many graduate millennials who earn less than their graduate baby-boomer parents might find themselves paying more tax as a result of loan repayments. No wonder they’re (we’re) annoyed. 

Thus Corbyn’s (uncosted) hints before the election that he would seek to annul existing graduate debt as well as abolish future fees might have been significant. It’s revealing that Angela Rayner doubled down on this point yesterday. Still, most of the evidence points to fees being a ‘piggy back issue’ linked to wider discontents with the NHS, housing, and Brexit. Perhaps, if home ownership rates for people in their twenties and thirties were not at record low levels, there would be less political angst surrounding student loans? Is higher education funding policy now indirectly tied to the disaster that is British housing policy? Income contingency may not mean that debts are ‘crippling’, but that doesn’t mean they don’t slow (or prevent) saving for that first mortgage. 

For the £9,000 fee paying generation, their time for real grievance will come. The height of their repayments will arrive much later in their careers – in their mid-late 30s – but also be much larger than for the £3,000 generation. Given the political shockwave that the current generation fee-paying graduates have created, there’s real danger for any government taking the £9,000 generation for granted going into a general election in 2027 or 2032.