As the Westminster government ruminates on changes to the student finance system to reduce the cost to the taxpayer, it would do well to consider the language used to describe student finance.
Why do we call it a student loan when it is not in any normal sense a loan? Why do we say tuition fee when it covers so much more than tuition?
Revising the language could bring about a change not just to the perceptions of applicants worried about debt, but also to the nature of the debate about who should pay.
The government is determined that undergraduate education in England must cost the taxpayer less. It seems various options are under consideration to achieve a reduction in the so-called RAB charge – the amount of student debt which is expected never to be repaid. Options include reducing the number of students (through the reintroduction of number controls or the imposition of minimum entry criteria), reducing the amount spent on each student, or moving more of the cost from the public purse to the individual.
There has been much comment, for example from former minister Chris Skidmore, that the high interest rate applied to student loans is unfair – though as Jim Dickinson has pointed out on this site, it actually makes the system more progressive.
Meanwhile, Nick Hillman has convincingly argued in a HEPI Policy Note that lowering the earnings threshold at which graduates start to repay would be the fairest approach if we have to reduce the cost to the exchequer.
What it says on the tin
But all of this debate is clouded by the language embedded in the student finance system.
Fundamentally, the terminology of loans, debt, interest rates and repayment is inappropriate. The size of the payments a graduate makes is based on their income, not the fee their university charged, most people do not repay the full amount (or in some cases any of it), and there are no consequences to an unpaid balance (which is simply written off at the end of 30 years). That feels nothing like debt as most of us would recognise it – just try getting any other kind of loan on similar terms!
Curiously, there is very little disagreement that the language of debt misrepresents the reality. The Augar Review called it “unhelpful and misleading”. And even Lord Willets, architect of the current system, commented in a HEPI webinar in January this year, “I wish it were called a graduate contribution scheme because that is really what it is, and it would be far better as a name.”
Who cares what it’s called?
Language matters – for two reasons. First, there is the impact it has on applicants and students. While launching a donor funded bursary scheme to allow 40 students at a time to study entirely for free at St John’s College Cambridge, the Master of the College commented that “high-potential pupils from low-income families, and young people leaving care, are deciding against university because of the prospect of significant debt”.
While there is actually scant evidence this has had a big impact on admissions (and she didn’t offer any), it is reasonable to assume it has been a concern for some. At the very least, students experience considerable stress from the notion that they will graduate with “the burden of a mountain of debt” – it’s hard to imagine quite the same reaction from the notion of graduating with “the burden of future tax liabilities if I earn enough to pay them”.
Secondly, a change of language could unlock some of the thorny areas of the debate. Let’s dream of a world in which the current student loan is called a “Graduate Contribution”. In this world, talk of interest rates become meaningless – there is no debt against which to apply interest. Instead, the future “Graduate Contribution” could be thought of as an agreement to pay additional future tax, as and when earnings permit, to cover:
- An amount for the University Fee (currently called the Tuition Fee – quite wrongly because it covers much more than direct teaching time)
- An amount for Maintenance Support (currently called a Maintenance Loan)
- An amount we might call a Mutual Support Payment. This would be to fund the costs of allowing students to have their university education now and pay only later, and also to make a contribution towards the costs arising from the fact that not all students will earn enough to cover in full their own Graduate Contribution.
For the individual student, the Mutual Support Payment would be seen as something akin to an insurance premium that allows them to attend university in the knowledge that they only have to pay for it if they one day earn enough to afford to do so – in effect it removes the personal risk that they won’t be able to afford it.
In this scenario, university applicants would be agreeing to pay for their higher education through future tax in addition to what they would otherwise have paid, as and when their earnings allow. While that may not be fundamentally different to the current regime, it creates a very different set of perceptions from the world of loans and interest rates.
Importantly, what I am calling in this scenario the “Mutual Support Payment” would be a fixed amount not a percentage of an outstanding loan that accumulates over time. That removes the unfair advantage currently obtained by the very richest graduates who use early repayment as a means of reducing their interest bill.
Such a system could maintain the link between what a graduate pays and the cost of delivering their education (albeit with the Mutual Support Payment as part of that cost). So, everyone stops paying either when they have paid their total Graduate Contribution or at the end of a defined period.
The remainder of the cost over and above what graduates pay in aggregate would, as now, be funded by general taxation (through a RAB charge), but that would be seen not as students failing to repay their debts, but rather as a socially desirable element of education policy. And the system would be progressive – since the richest graduates would pay the most and would make a contribution to the costs of educating poorer graduates – while still maintaining a link between what a graduate pays and what they received.
This model would also give government a new policy lever – ministers could change the size of the Mutual Support Payment to make an impact on the RAB charge, all in the knowledge that it would be only richer graduates who would bear the additional cost.
Can the leopard change its spots?
The original reasons for using the language of loans now seem out of date. No doubt there was an intent back in 1990 when loans were introduced to create a sense of personal ownership by the student of their education and to drive a degree of customer-supplier relationship between student and university. But that dynamic is well established now (too well established, some might argue!) and a change to the language would be unlikely to unseat it.
Of course, there is also a political dimension. Lord Willets has said that as far back as 2012 when he increased the fee to £9,000, the language battle had already been lost because the student loan terminology was so well entrenched. He cited the example of Margaret Thatcher in the 1980s doggedly referring to the “Community Charge” in a wholly unsuccessful attempt to stop everyone else from calling it the “poll tax”.
But is that a good analogy? The term poll tax stuck because that is what it was. the opposite is the case here – a change from student loan to Graduate Contribution could justly be portrayed as a better reflection of the actual substance. No doubt a change of language introduced on its own would be derided as a triumph of presentation over substance, but as part of the forthcoming wider package of changes to the system, might it not be managed?
None of this will change the fundamental nature of student finance – to make the system cost less, ministers will still need to make difficult choices about the earnings threshold and the length of the term over which payments are made. But language really does matter. Now is the time for policy makers to grasp the mettle and change the language students, parents, universities and all of us use to discuss student finance. It might just help students to understand what they are signing up for, and help universities keep the funding they need.