Students and young graduates were promised support to change our lives – but the government ripped up the rulebook

I remember very vividly sitting in one of my GCSE music classes, talking to my teacher about university. I wanted to go, but I was worried I wouldn’t fit in, looking the way I did and talking the way I did. And I was worried about the £9,000 fees I was about to pay, too.

My music teacher was adamant I’d never even see the money leave my account. It would be so little I wouldn’t feel it day to day. After a long back and forth she convinced me, to the joy of my parents – although I don’t think it was ever a debate. Going to university would only exponentially increase my chances of getting a job, she said, and I’d be better off for it.

A few weeks later I heard the same back and forth between another student and a member of staff, but he refused to back down, and put his hands up – “I’m not feeding into this. We’re just going to pay more because we’re poorer.” I now think he had a point. The government has spent the autumn talking about young people. But for those of us it sent to university, there’s still no plan.

We were sold it

The idea of university as the way up came from the top. In 1999 Tony Blair set a target of 50 per cent of young adults going into higher education, schools like mine took that to heart, and for kids like me a degree was sold as the safest bet going. Between 2011 and 2017 the government ran student finance tours in thousands of schools, and the pitch came with a script. Presenters were told to avoid words like “debt”, one script compared repayments to a phone contract, and the Department for Education’s own slides said it was “just £15 a month” on a £27,000 salary.

In 2010 the government said the repayment threshold would rise every year in line with earnings, none of those materials said ministers could change the terms after we’d signed, and this summer the cross-party Treasury Committee called it mis-selling. And we were told the state would share the cost – in 2012 the government paid roughly half of what it cost to teach an undergraduate, and students paid the other half.

It’s not just the repayment side of loans that looks set to be absent from the Budget. The maintenance loan – which is tested on household income, so the more your parents earn, the less you get – is pushing students into working longer hours to survive at university. The income threshold for the full loan is £25,000 and has been frozen since 2008, and earning a penny over means the loan starts shrinking. Students fill that gap with work, and the Sutton Trust found almost a quarter of students have missed a deadline because of a job. On paper, my parents’ overtime made us well off enough to stop me from getting the maximum loan – in reality it was two people without a single GCSE between them, working 12-hour days, with nothing left over.

A student whose household is on the median income gets a loan of around £9,028. After average student rent, that leaves just under £60 a week for everything else. Maintenance loans only rise with forecast inflation, and this year’s increase was just 2.71 per cent. When prices outrun the forecast, students make up the difference. After the last inflation spike, the loan should’ve gone up 18.5 per cent just to stand still.  The trap is that you either borrow the max and owe more, or borrow less and work your way through your degree. Either way, the less your family has, the more it costs you.

A balance that only grows

I borrowed around £50,000, and interest starts the day the first payment lands. On a Plan 2 loan it’s RPI plus three per cent while you study, and my statement shows rates between 4.1 per cent and 6.9 per cent while I was still a student – a year after I left, it hit eight per cent. By the time term three of my final year came to a close on 9 June 2023, I’d already been charged more than £3,600 in interest – before I’d finished my studies, and before I’d even started work. Today I owe over £60,000, and all in I’ve been charged over £13,000 in interest. The interest rate rises with your salary, up to RPI plus three per cent, and even though it’s capped at six per cent until August 2027, I’d need a salary most people never see just to stop my balance growing.

Now Universities UK has found that the government now expects to fund just 16p in every £1 spent on teaching undergraduates, with students covering the other 84p. In 2012 it was roughly half and half, as we’ve covered previously on the site. In real terms, government funding for teaching undergraduates has fallen from £8.9bn to £3.3bn, and per student the state’s share is down 71 per cent while what students pay is up 51 per cent.

The goalposts keep moving too. Plan 2 borrowers were promised the repayment threshold would rise with earnings, but it’s been frozen before, and from next April it’s being frozen again at £29,385 for three years – which means graduates repay more each year on loans they’ve already taken out. Martin Lewis has called it “immoral” and the Treasury Committee, which heard from 52,000 people, says the government has a “moral obligation” to reverse it, describing the system as a 30- or 40-year supplementary income tax. Meanwhile the loan book is worth far less than the government assumed, and graduates are the easiest place to claw that back – we were promised a partnership, and ended up with most of the bill.

Labour conference in Liverpool was meant to be the moment the government set out its offer to young people. Chancellor John Healey promised to take us “from generation jeopardy to generation hope”. His answer for the nearly one million young people not in education, employment or training (NEETs) was a first job with training and a wage, and £100m for mayors to run local apprenticeship services. Healey called that a down payment on Alan Milburn’s review of young people and work. But Milburn’s final report has been held back until after the Budget, reportedly so it doesn’t overshadow it. In the meantime, the Budget is expected to cut the cost of hiring under-25s.

Getting young people into work matters. But a degree is no guarantee either. Around 141,000 NEETs have a degree as their highest qualification. And student poverty is feeding the problem, with students working to cover the gaps in their loan filling the entry-level jobs young NEETs might otherwise get. There was no answer to the loan that never gets any smaller – the very next line pivoted to home ownership.

What students and graduates are owed from this budget

Schools like mine pushed university hard, and my music teacher meant well, as most teachers did. But it was successive governments that set the participation target, wrote the student finance scripts, and promised the terms wouldn’t change. And it’s the students they said they were helping who are now paying the most. If the government wants universities to improve social mobility, it has to stop changing the terms of student loans after people have taken them out. The Budget is the first chance to stop punishing graduates. The Chancellor should reverse the Plan 2 threshold freeze, as the Treasury Committee has already asked. The £25,000 parental income threshold should be raised so the maintenance loan reflects what families can actually give. And interest on loans while students are studying should be stopped.

The Budget should also consider the wider cost of being a student. First promised in 2013, sharia-compliant student finance still has no launch date, and a new report puts the cost of the delay at £450m. Maintenance grants should be brought forward from 2028 and open them up beyond students on a limited set of courses with household incomes of £30,000 – and find a better way of funding them than exploiting international students further. And if no change will come to the loans, the government should look at alleviating the pressures on the wider student experience. Give students a national discount on bus travel – Scotland already offers free buses to under 22s. Or bring purpose-built student accommodation under the Renters Rights Act – it’s currently exempt and its beds already cost more than the maximum maintenance loan.

That boy at my school was right – students are paying more because they’re poorer.