The universities where 99% haven’t repaid their student loan
Jim is an Associate Editor (SUs) at Wonkhe
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Under the headline “The universities where 99% haven’t repaid their student loan”, it has used the Freedom of Information Act to get data on the number of borrowers from England and the EU in the 131 that appear in its league table.
It’s then asked for the number of those borrowers that have paid that loan off in full, and come up with a percentage that applicants, observers and enemies can use in their decision-making, commentary and attacks on Twitter.
After all:
With many students struggling to repay debts, the taxpayer is being left to pick up the spiralling bill.
Oxford and Cambridge are top with 23 per cent each, and LSE, Imperial and Durham are close behind. Languishing at the bottom are UWTSD, UWS, Hartpury, Falmouth and Ulster, hovering around the 1 per cent mark.
Good grief. On one level this “measurement” will pick up the highest earners post-graduation. But it will obviously also be distorted by the rate of expansion since 2006 – Falmouth, for example, had a total UG enrolment of 1975 back in 2006/07, and 5365 in 2021/22.
As such it’s also distorted by the shape of expansion since 2006 when compared with different fee levels. Students weren’t taking out tuition fee loans for £9,250 in 2006 – and they obviously take longer to repay.
The table doesn’t take into account that the tuition fee loan and the maintenance loan are paid off at the same time – and so universities where students are entitled to less maintenance loan have students graduating with lower debts that are faster to clear, graduate outcomes all being equal.
And the calculation fails to take into account that some universities enrol more students who don’t need to take out the tuition fee loan at all – and so again, graduate with lower debts that are faster to clear, graduate outcomes all being equal.
Yes, I know. It also doesn’t take into account the career choices that might stem from the mix of subjects that a university teaches, or the location of the university, or the earnings profile of the entrants’ families and all of the other things that you’d want to control for when comparing “performance” in this way.
The accompanying narrative chooses the “graduate premium” frame – and doesn’t reflect at all on the inequality of it all. Do we really want a society where the supposedly “most academically able” all earn vastly more than others? I don’t.
But the pernicious part is the debt framing. £9k fees were never supposed to be paid back in full. The idea was always a roughly 50:50 split between taxpayer and graduate, with the most successful paying more (sometimes more than 50 per cent) over their lifetime to cover those who were less economically successful.
If the last ten years has taught us anything, it’s that the most successful in society really resent subsidising others’ education. So article after article plays to the gallery, and bangs on about the tax/debt hybrid as a debt alone – one that many don’t (shock horror) don’t repay in full. And over time, the idea of any subsidy has come to be seen with horror.
That’s what has led to the changes in recent years – lower repayment thresholds, lower interest rates and a 10 year extension to the cut off – that now sees average graduates over their lifetimes on average paying much more for much less, while the richest grads pay much less.
The very richest in society pay upfront, of course – where £9,250 is a steal if your mum and dad have been paying £20,480 a year for in private school fees (Schoolfeeschecker, average cost per child).
But so skewed is the public’s perception that the hybrid is really just a debt, coupled with the recovery changes introduced since 2022, that reverting the system to more of a hybrid – where fees are lower, interest rates are higher (which tends only to impact men in their late 50s and 60s) and the rest is paid for through progressive general taxation, that any hopes that Bridget Phillipson might have had of flattening the curve are getting harder and harder to pull off – because neither Sunday Times readers nor Rachel Reeves will stand for it.
Of the 131 universities listed in the Sunday Times article only 20 (all bar one a Russell Group university) have repayment rate above 10%. Indeed only three have repayment rates above 20%.
These figures mean that for most people the student loan system operates as a graduate tax at a marginal rate of 9% for earning above £25,000. The people who avoid this fate have one of three characteristics. First, they have parents who pay the fees upfront. Second, they occupy jobs for a long period of time on a full-time basis in occupations like medicine or elite business services (e.g. consultancy, finance and some legal roles) or in leadership roles in the public sector. Finally, a small number of students evade repayment.
Access to the roles where full repayment is above 10% is invariably through courses where the undergraduate U.K. student numbers are controlled or have not expanded in the same way as other courses. In this respect the current arrangements partially resemble a Ponzi scheme.
For graduates attempting to repay their loans the interest rate on the underlying student debt is set at the prevailing market rate or retail price index + 3 percent whichever is the lower. This August that is 7.9%. Meanwhile, average wage growth is c3% and a little higher for graduates. The size of the amount to be repaid for most students is therefore increasing at a faster rate than wage increases meaning their overall debt is increasing. This has been and is likely to remain the case for some time because the days of ultra low interest rates 2008-2022 are over. Given the overall level of U.K. Government debt those days of low interest rates aren’t coming back, the international bond markets won’t let that happen and Quantitative Easing (QE) has been replaced by Quantitative Tightening (QT). There is no cheap money anymore.
So given that university education brings with it a 9% income tax for people earning over £25,000 and is a long way below overall average earnings of c£34,000, now is a time to think about how costs can be reduced.
If anyone is interested I can think of ways of reducing the costs by £2 billion per annum in a relatively short period of time.
“For graduates attempting to repay their loans the interest rate on the underlying student debt is set at the prevailing market rate or retail price index + 3 percent whichever is the lower. This August that is 7.9%. Meanwhile, average wage growth is c3% and a little higher for graduates. ”
Spot on, Huw. As one of the graduates from the first £9k cohort, this is exactly my experience. I like to think I earn reasonably well in the HE Sector, however, I didn’t reach the repayment threshold for 3-4 years after graduating. I seem to remember that in my first year of repayments, I was paying off £19 a month and the interest was accumulating at over £290 a month. My wife is in a similar position, being the same age and working in the Civil Service.
The headline from The Times is extremely dangerous – it will inevitably lead to more “Mickey Mouse” conversations around degree programmes. I read English, as an undergraduate and postgraduate. Just because it took 3-4 years for me to reach a “graduate” salary doesn’t mean that a) that wasn’t a valuable degree and b) the blame should be lay at the University door.
Id happily contribute to others education, as long as they are getting educated in something that is going to be useful to society. However I think the Times article points out a lot of people must be getting educated in something Society doesn’t deem very valuable at all. How many “Psychology of Fashion” or “film studies” graduates do we actually need? so why are we paying to churn out more and more every year?
Even if you think that graduates should repay in full, the figures include people who graduated last year…
The Government forecasts that around 65% of full-time undergraduates starting in 2023/24 would repay them in full. This is more than double the forecast for the 2022/23 cohort (27%) because of reforms to student loan repayments for new students. Having said this most previous forecasts have been wrong and have overestimated repayment rates and levels.
It’s not wholly clear what they are measuring and how, but there is a set of repayment issues.
Yes but that’s not what the ST is measuring, is it
An interesting twist on this is that when it comes to graduates having children and returning to work the mother (most likely a graduate) will have a 9% higher marginal tax rate than the father (less likely too be a graduate, or more likely to have paid debt off). Who is going to be working part time if at all! Bang goes another Gov’t policy objective.
Very significant differences between the typical repayment/non-repayment paths of men and women. See London Economics analysis of plan 5 arrangements.
Study funded by Nuffield Foundation.