Higher education students from Scotland will be able to access student financial support over the summer for the first time this coming academic year.
This is another example of the actions being taken by the Scottish Government to support students through the cost of living crisis
…says higher education minister Graeme Dey.
Don’t get too excited. Following its review on the issue that was published last June, the Scottish Government has announced that as of this autumn, eligible undergraduates will be able to take their annual entitlement and spread it over 12 months rather than nine. They’re not getting more money.
It’s only care-experienced students that get a summer bump – the renamed Summer Accommodation Grant replaces the Care-Experienced Accommodation Grant and is worth up to £1,330 to help ensure they do not fall into rent arrears over the summer.
The changes coincide with the previously announced £2,400 increase to the annual support package, which sees the main undergraduate funding package rise up to £11,400 – albeit with a household income threshold down at £20,999, which means fewer and fewer students are getting that max every year.
(In fact, since 2016 – 17, the lowest parental earnings threshold has increased from £19,000 to £21,000, but the next two thresholds have been frozen in cash terms, despite growth in average earnings of 29 per cent over the same period. IFS reckons that that means some students are eligible for a quarter less in real terms in 2023 – 24 than a student whose family was in the same position in the earnings distribution would have been entitled to in 2016 – 17!)
Had me a blast
There’s actually a really good case for student support over the summer – when the Scottish Government polled almost 1,000 students in 2021, it found that 57 per cent struggled with financial support/income over the summer more than they did during term time, 67 per cent said that they paid rent/accommodation costs over the summer, and 63 per cent said they experienced financial hardship over the summer.
That said, the poll covered postgrads – who both won’t be getting the option and whose total support (while increasing) will be £13,900 – some distance from what they need for both fees and living costs.
Now maybe I read too much into this – but on April 21st 2021, in an NUS Scotland Holyrood election debate, Nicola Sturgeon was asked about support over the summer, and said this:
I think this is a big gap right now. And if I think back to the dark past when I was at university, you had much better support, you could continue apply for benefits over the summer, for example. So we need to get back to something that is much more all year round.
I think I would say there’s a short term imperative which we are keen to look at, as we’re still dealing with the disruption of the pandemic, what can we do through greater short term use of discretionary funding to provide provision in the here and now.
But longer term, I think we do need to, as we do what I’ve already spoken about – move towards this support at the real living wage level – how do we make that more or year round, not just in term time… I do recognise this as one of the key gaps in support provision right now.
I’m not convinced that anyone listening to that would have thought she meant “Living Wage Level for the 9 months, only to then spread that 9 months’ worth over 12 months instead if you like”.
It’s also worth remembering that that Living Wage boast is somehow based on 25 “notional” hours of study per week x 38 weeks per academic session = 950 hours, despite the SCQF calculating one SCQF credit point at 10 hours – which should mean 120 SCQF credits a year x 10 = 1,200.
In other words, according to the SCQF, students should be “notionally” studying 31.6 hours a week for 38 weeks – and so instead of getting access to max £11,400 a year as of September, they should be getting £14,400.
Happened so fast
But that “spreading” trick isn’t the only one that’s in use here. The IFS has published a new analysis of higher education spending in Scotland as part of its second annual Scottish Budget Report.
It finds that funding for universities’ teaching costs – which had already fallen by 19 per cent in real terms per student over the last decade – will be cut by a further 3.6 per cent next year.
And the boost to total support for the poorest students we’ve seen this and next year has to be set in context – it was cut by 16 per cent (£1,600 per year) in real terms between 2013–14 and 2022–23.
IFS also notes that from April 2024, the earnings threshold above which Scottish graduates make loan repayments will increase from £27,660 to £31,395 – whereas the threshold for most recent graduates in England and Wales is frozen at £27,295 until 2027, and at £25,000 for those that entered in September.
This will reduce monthly loan repayments for many by around £28, although the highest-earning half of Scottish graduates can still expect to repay their loans in full over their lifetimes.
That’s a bit of generosity that’s not well understood. Since 2012, Scottish student borrowers were required to repay their loan at a lower threshold than those from England or Wales – but in 2016, most political parties were persuaded by NUS Scotland to promise to raise the repayment threshold to match the higher one used for England and Wales.
That recommendation then featured in the Scottish Government’s review of student funding, and the Scottish Government agreed, committing to doing so by the end of that Parliament – although Scotland only caught up with (and very slightly overtook) the English and Welsh repayment threshold back in May.
It’s interesting because the generosity of the coming student loan bump and the generosity to graduates doesn’t cost the Scottish Government a penny.
IFS points out that it’s the UK government that finances the issuing of loans to Scottish students, and bears the cost of any eventual loan write-offs as long as the Scottish system has “broadly comparable costs” to arrangements in England.
What we don’t know is whether costs are compared per student or per borrower, or by some other method. It’s a Treasury mystery.
Either way, when Graeme Day says that the uplift “demonstrates the Scottish Government’s commitment to helping students – even as we face the most challenging financial situation since devolution”, what he’s not saying is that it’s the Westminster government picking up the tab for increases to student support – while the Scottish government slashes teaching funding.
Tell me more tell me more
If you’re trying to work out the long-run cost of student loans, you look at loans issued in the current year, and then you estimate future loan write-offs and interest subsidies. IFS does this by estimating the proportion of loan outlay issued each year that is not expected to be repaid, discounting future repayments only to account for inflation.
As such it estimates the so-called “RAB charge” for the 2023 Scotland cohort at +14%, suggesting a cost of around £3,500 on average per student – rising to 20% for the coming reforms.
But that’s not the only way to calculate the RAB. The one used by the UK government values future repayments in present terms using the HMT discount rate, which is meant to capture the opportunity cost of government funds – the cost of funding student loans rather than undertaking other government projects.
Given the Treasury currently uses a negative real discount rate, the same repayment in real terms counts for more in the RAB charge calculation the further in the future it is made. So in Treasury terms, IFS estimates the current RAB charge for the 2023 entry cohort in Scotland at minus 11 per cent – in other words, the UK government thinks it’s going to make around £2,800 on average per student.
Scroll forward to the intended changes to the repayment threshold and the bump in loans, and the total government outlay on higher education goes from £1.8 billion to around £2 billion per cohort. IFS reckons the Scottish Government will only pick up around half of the long-run costs under the new policy, with an increasing share of costs falling on graduates in the long run (from 38 to 40 per cent) and a near-doubling in the cost of eventual loan write offs to the UK government from £105m to £205m.
But using “Treasury brain” methods for calculating the discount rate (which has actually gone from -RPI+1.1% to -RPI+1.3%), and all the changes do is take a “profit” of £2,800 per Scottish student and reduces it. So Scottish student finance very much remains in what the Treasury must regard as a “broadly comparable costs” zone.
How much dough did he spend?
Put one way, intuitively you’d think that overall, the more we spend on subsidising students’ tuition costs, the less we can afford on maintenance. But somehow perversely we’ve ended up with a system where the more that Scotland spends on tuition cost subsidy, the more that Westminster can spend on maintenance “subsidy”.
Or put another way, “free fees” aren’t quite the deal they look – because Scottish students get a lot less spent on their education each year, and in Treasury calculations pay more of their maintenance loan debt (plus its accrued interest) back.
(Scottish students overall get pretty much the same amount spent on their education as English students do, only often spread over four years, hence less per year – and by definition per credit.)
Add all that up and on average, the Treasury reckons that 2023 English students will borrow £47.2k for 3 years’ worth of study and pay back £37.2k – whereas Scottish students (many of whom do 4 years) will on average borrow about £25.9k, and pay back about £28.7k.
But – and here’s the kicker – next year with that maintenance “bump” coupled with some entitlement threshold drag, IFS expects 2024 Scottish students to borrow about £34.3k each. If the Treasury still applies its version of the RAB, Scottish students will in effect end up paying not far off what English students pay – only with a significant proportion enjoying one less year in the labour market.
Of course if the Treasury started to calculate the RAB differently, the Scottish system’s 30 year write off and higher repayment threshold could suddenly look much more expensive.
But as it stands, if Scotland symbolically sticks with “free tuition” via university grant funding but loans (and some grants, albeit becoming less of a proportion) for maintenance, given the Scottish Government picks up the tab for grants but HM Treasury picks up the “tab” for loans, while IFS figures suggest there’s actually a bit of headroom left to increase maintenance support even further, university budgets are going to continue to be squeezed.
scottish dreams, ripped at the seams….