We probably owe students £1,000

A lot of lobbying and campaigning attempts to argue for a better world, with improved assumptions and logic about what or who to value or prioritise.

But one of my hobbies is to play the ball where it lies – by which I mean I like to take the bases and assumptions that policy makers bake into their proposals, and test them properly. Hold people to their existing promises, if you will.

Take student maintenance support. I’d love to make a whole host of changes if I could – swapping debt for grants, properly assessing differential rents in different parts of the UK, and properly tackling the sky high rents that students studying away from home face.

But for now, let’s not go there, and instead take ourselves back to 2017 when Theresa May’s “British Dream” speech ushered in what was to become the Augar review. When that review was finally published in May 2019, it contained proposals on student debt that doubtless will be back in focus soon enough.

If we don’t get major changes to the English undergraduate funding system, we may well get a host of minor changes – and they could involve:

  • Changes to the interest rate (which includes a fairly opaque slider that moves it between 2.6% and 5.6% depending on annual income)
  • Changes to overall debt levels (by changing (maximum) fees)
  • Changes to the write off period (currently 30 years)
  • Changes to the repayment threshold (currently at 25k up from 21k thanks to Theresa May)

We could have all sorts of discussions about how the system works, who it appears fair to and the differential impacts on different kinds of graduates (and crucially, when it has those impacts). In an ideal world, I’d be scrapping tuition fees and offering generous maintenance grants for all. But if that’s not happening for now, I’d make some changes if I could.

For example, if it was up to me I’d want to take steps to relieve graduates in their twenties from repayments even more than Theresa May did by shifting some of that later, perhaps via repayment holidays that would add to the back end of the 30 years.

In a more ideal world, I’d want to see what I could do to kill off tuition debt and fees altogether – but in doing so I’d change the terms for maintenance loans to try to recover the maximum amount from graduates – again for lots of reasons that are too long to explain here.

Crucially, I’d want to examine carefully whether the amount of maintenance support “in the pocket” of current students is the right amount – and to be fair, Augar did have a run at that.

When the review was published, the section on student maintenance looked at the costs facing students to assess whether the level of maintenance support on offer to students was sufficient, and you might have assumed that to make that assessment, some research would have been carried out to determine how much students were spending. You would have assumed wrong.

Page 188 of Augar says that median expenditure by full-time students living away from home and studying outside London was £11,679 – significantly higher than the £8,700 maximum level of loan available, with the difference made up through extra parental contribution or students earning income from employment alongside their study.

But a closer look revealed that that £11,679 was in 2018/19 “prices”. It was a figure that in fact came from DfE’s “Student Income and Expenditure” survey from 2014 (not commissioned since), and to get to 2019 numbers the DfE-supplied secretariat simply uprated everything using the retail price index, a process detailed in a supplementary paper.

There was a problem with that uprating assumption – the cost of student housing had been rising faster than inflation for the best part of a decade. RPI between 2014 and 2019 was just over 11%, but student accommodation rent inflation was about 25% in that period – so that total figure on expenditure was undercooked by about £1,000.

So what about income? The review goes on to propose the use of the 21-25 National Minimum Wage rate as the benchmark for maintenance – after all, “80% of undergraduate students are under 25 in age”.

Was that helpful? This NMW site doesn’t think so. “The one major area where inflation remains high is housing” it notes, “which affects everyone but especially the poorest”. To put this into perspective, it goes on – a person earning minimum wage “would only just be able to afford a one bedroom flat in London. Providing they don’t eat, use power, pay council tax. or wear clothes”. Or, indeed, buy books, join societies, or pay for graduation.

The review panel also said that it did not believe that students should receive a higher income than the minimum received by young people in full-time employment. It omitted to mention that young people in full-time employment would get at least £30 a week in universal credit – almost £1,000 over the thirty weeks.

So funnily enough, both on the expenditure side and on the maintenance income side, Augar was out by around £1,000. Augar goes on to note that living costs in London are higher than elsewhere because rents are higher, and notes that that may be an issue in other cities too – but merely concludes that that is a subject “worthy of further enquiry”.

Meanwhile the panel said that while it was “essential” for students with children to be adequately supported, it had not examined closely whether the present arrangements adequately reflect the higher cost of living, as well as childcare, and that this too was a subject “worthy of further enquiry”.

Maybe DfE has spent the time since Augar’s publication in May 2019 carrying out that much needed enquiry work. But don’t bet on it.

In any event, when we do get an Augar response we’ll inevitably get more debate like this from HEPI’s Nick Hillman on changes we might make to loan terms to balance HE’s books. The danger is we forget about the “pound in students’ pockets” in the process.

So what DfE should do when we get an Augar response is run with its maintenance principles, and disown the faulty calculations – by increasing that overall maintenance figure by £1,000 for students studying outside of London.

And given students are struggling this year – in desperate need of an income boost given the lack of part time work, and feeling pretty hard done by in relation to fees – ministers should implement the £1,000 maintenance loan increase immediately, pro-rata, for the rest of the academic year.

It should also put some temporary hardship top up fixes in for student parents and high rent cities while it carries out those “further enquiries”.

If system changes are about to try to claw back more from graduates anyway, government may as well do the right thing on maintenance in the process.

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