Fees and intragenerational unfairness

The Guardian recently proclaimed, “we now know that at least 10% of the wealthiest students from the UK have their fees paid upfront by their parents”. In fact, we don’t know this, not remotely.

With the future of student funding in England in limbo – with stories like this getting cut through on government and opposition – the research which prompted this statement deserves careful reading.

The report published last week by the Intergenerational Foundation (IF), “Escape of the Wealthy” declared:

There is one group of people who manage to escape the entire [student loan] system: those with the means to pay for their university education upfront – the self-funders. Because they are likely to be wealthy, these students can avoid the 30-year-long burden of student debt.

IF found that “10% of UK-domiciled first degree full and part-time undergraduate students studying at English universities are likely to have paid their tuition fees up front and therefore able to avoid taking on student debt”, and that “wealthy students will escape the average £5,800 of accrued interest upon graduation”. This report led to headlines such as “One in 10 students in England ‘rich enough to avoid big debts'”.

A sense of proportion

The IF is concerned that student debt can create intragenerational unfairness, putting those from lower income backgrounds at a long-term disadvantage compared to those from better-off households. It’s a concern I share. In my PhD research I am looking at the relationship between household income, borrowing, earnings and the reproduction of inequality in Scotland and Wales. It’s material that in Scotland a relatively large minority of students, disproportionately from higher income households, don’t take out any loans at all. But still these headlines bother me.

The starting point is that we need to know what proportion of students in England who could have borrowed did not do so, and what their characteristics are. For this group, the repayment system is irrelevant: they have nothing to repay. The problem for the IF is that, in contrast to Scotland or Wales, there is no single data set that would let anyone estimate this proportion reliably.

The HESA data be the next best thing, but it can only answer a much more limited question: what percentage of students studying at the level of a first degree relied on “no award or financial backing” to make the largest single contribution to their fees in 2016-17? The IF found 10.1% of all first degree students fell into this group across all English HEIs: these students are termed “self-funded”.

The limits of data

So this data covers the funding of fees alone in a single year. Institution-level data from HESA cannot be used to tell how the same people funded their living costs, nor is anything known about their position over the whole course. My own research suggests not borrowing in one year can’t be assumed to predict not borrowing for other purposes, or in other years.

A substantial limit of the HESA variable used is that it will include people disqualified from receiving a fee loan under the “previous study” rules, but we cannot tell how many from the published figures. Some of these will be mature students self-funding a second undergraduate degree. I would hesitate to assume they are commonly being bankrolled by wealthy parents: many may be working to pay their own fees. Then there will be those taking more years to do their first degree than the system will fund. They will often already have borrowed all they can for fees and may be pulling together an extra year’s funding with great difficulty.

Because HESA only records the single largest source of fee funding, that 10.1% will include some people who are part self-funding and part borrowing, most obviously at private institutions (this probably explains that Buckingham University is shown as having 55% of first degree students self-funding). These students can still take out a decent-sized fee loan, but may need to find the same and more privately to meet their full fee bill. Another group who might be swept up here are those who do not regard post-2012 student loans as sharia-compliant – and draw instead on funds raised through other networks or lenders than just their family.

Not just the richest

There are various clues that more is going on in these figures than a manifestation of private wealth. The percentage of self-funders fell to 7.5% when part-time students were taken out. That implies a self-funding rate of around 30% for part-timers. It rose from 10.1% to 15% when “other” undergraduate students were included. Yet neither part-time nor other undergraduate study is strongly associated with privilege.

In addition, the relationship between the proportion of self-funding students and recruitment from less deprived neighbourhoods was found to be “not particularly strong” when all 120 English universities were analysed. To find a strong relationship the researchers had to concentrate on the Russell Group, covering less than half of students. Here the figures do show a strong positive relationship between the proportion of self-funding students and the proportion from less deprived neighbourhoods, and from non-state schools (and a weaker one with parents’ occupational status).

Within the Russell Group, the researchers found “golden triangle institutions” tended to have high self-funding figures. The inference that self-funding students from wealthy backgrounds are especially common in this subset of institutions is plausible. But these also tend to be the institutions able to afford the most generous bursaries, so some influence on the figures from low-income students choosing to use these to reduce their fee debt, rather than add to their living cost support, can’t be excluded.

All in all, that 10% of self-funders look likely to be a more diverse, and potentially more indebted, group than the reporting suggested. I would expect the proportion of first-time, first-degree students from England who finish university debt free by choice (or even just with no tuition fee debt) and who do so specifically by drawing on family wealth, to be much less than 10% and very possibly below 5%. Meantime, others students will use scholarships, institutional bursaries, sponsorship and other sources recorded separately by HESA to cover their fees: how far that benefits a different group, or the same one, and on what scale, is not explored in the IF research.

Another view

The Mirror’s pithy alternative take, “Rich students are paying tuition fees up front but it’s actually utterly stupid”, suggests another reason for caution. The people who can most easily find £27,000 in cash will include some of those most likely to be able to get a higher return by doing something else with the money, even under the Plan 2 interest rate.

None of this is to quarrel with the assumption that students from wealthy families will have a better chance than others of avoiding fee debt, or that within the Russell Group this effect may be particularly visible. We just can’t quantify the overall numbers doing this at all reliably using the available data.

The IF research quickly fuelled some larger claims. The Guardian article quoted above deduced from it that “Rich students, unlike any other group, get to go to university for free.” That makes the strong assumption that if your parents do find £27,000 for your fees, and perhaps also pay for all your maintenance, you will not in effect pay later. We know very little about the impact of student funding on later parent-child wealth transfers. What proportion of students have families who could absorb a loss of several tens of thousands of pounds, with no lasting impact? I’d be wary of assuming it was close to one in ten.

In cases where students live at home,  parents’ contributions are made in kind or are very low, and there are no fees (as in Scotland), it is more plausible to argue that families can keep students out of debt with minimal long-term impact on household finances. But living at home is a relatively unusual choice for those from higher incomes in England. And fees, of course, are not free.

The question of maintenance

That leads to the most insecure conclusion which might be drawn from the IF research. This is that borrowing for fees fuels inequity between students. In the UK, when systems have only offered loans for maintenance, but not fees, fewer students have borrowed and borrowers have been more concentrated at lower incomes. That is not self-evidently fairer than a system which spreads borrowing over, say, 95%+ of first time students.

Unlike maintenance debt, fee borrowing also tends to be relatively uniform by income, while maintenance loan tends to skew to those from lower incomes if grant is low or absent. The IF does touch on the regressive impact of grant cuts, but that point risks being eclipsed by its headline concern about who borrows for fees. And as fee loans have to be spent on fees, they cannot be squirrelled away to be used for financial advantage later, by those who don’t need the money now.

Student loan systems certainly have the potential to reinforce differences in wealth within cohorts of graduates, and most clearly if coming from a well-off background is a strong predictor of borrowing nothing at all. But anyone who is concerned about the role of loans in contributing to intragenerational unfairness in England should be wary of the messages, explicit and implicit, in the latest batch of headlines.

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