The higher education system in England will become fairer for students and taxpayers thanks to the major reforms announced today by the government.
Student funding will be put on a more sustainable footing, ensuring that more students repay the loan in full, and will stop substandard university courses that do not benefit graduates in the long run.
Under the current system, more people than ever go to university, but too often students incur debts for poor-quality courses that do not lead to a thesis with a good salary. This means that some students do not even start paying the student loan. And currently only a quarter of students who started full-time study in 2020/21 are projected to fully repay their loans.
The cost of student loans is growing rapidly. The value of outstanding loans at the end of March 2021 reached 161 billion pounds and is projected to grow by 2043 to half a trillion pounds.
Today, the government is taking steps to solve the problem head on, rather than passing the problem on to future generations, identifying major changes in how students will repay their loans, and creating a sustainable system that also guarantees access for all.
To make the system fairer for students, the interest rate on student loans will be set at RPI + 0% for new borrowers starting training from 2023/24, which means that graduates will no longer pay more than they borrowed in real expressions. This is in line with the key commitments of the manifesto to address interest rates on student loans in this House.
Combined with the long-term tuition freeze announced earlier this month, a student enrolling in a three-year course in the 2023/24 academic year could reduce their debt to £ 11,500 the moment they are eligible to repay.
Today, the government also announced that the tuition fee limit will be frozen at £ 9,250 for another two years – until 2024/2025 inclusive, which will further reduce the real cost for students.
To make the system fairer for taxpayers, the repayment threshold – the moment graduates start paying off student loans – for new borrowers starting their studies from September 2023, will be set at £ 25,000 by 2026-2027.
This still means that graduates will not start paying until they exceed the current average salary of young graduates by £ 21,500.
This ensures that those who benefit from a university degree make a fair contribution to its cost: for example, a graduate who earns £ 28,000 will return £ 17 a month.
Alumni wages continue to rise – in 2020 the average salary of 21-30 year olds was £ 6,500 higher than for non-alumni – so we rightly ask those who benefit financially from investments made by taxpayers their higher education to contribute in this.
The student loan repayment period will also be extended to 40 years for new borrowers from September 2023 to allow more students to repay the loan in full, given that people are now working and earning longer.
Taken together, these changes will lead to significant savings, ensuring that the student funding system will be sustainable over the long term and can continue to benefit hundreds of thousands of students each year.
Education Minister Nadhim Zahavi said:
The world’s leading universities and colleges in our country are key to capacity building, opening up access to a range of lifelong flexible options after the age of 18 to help people learn, retrain and improve their skills.
This package of reforms ensures that students are offered a range of different paths, whether higher or further, that will lead to opportunities with the best results – and put an end once and for all to high interest rates on their student loans.
I am pleased to control such a significant amount of investment – almost £ 900 million – backed by a revised, fairer and more sustainable student funding system that will make higher education accessible and accountable. These changes will create a fairer system for both students and taxpayers.
Minister of Higher and Further Education Michel Danelan:
We provide a fairer system for students, alumni and taxpayers, and provide a future student funding system. We are freezing tuition fees and lowering interest rates for new student loan borrowers to make sure that under these conditions no one will repay more than they borrowed in real terms. This government is fulfilling its promises in the manifesto.
We are investing an additional £ 900 million in our education system after 18 years and are making revolutionary changes in the way lifelong learning, retraining and upgrading is carried out.
The government has also published two consultations. The first will be looking for opinions on how to encourage young people to go the right way and get a fair deal for their investment if they decide to go to university.
This includes considering the introduction of minimum requirements to ensure that students are not pushed into higher education before they are ready, and controlling the number of students so that substandard, low-cost courses that lead to poor outcomes for students will not be does not stimulate uncontrolled growth.
The second will set out plans for a lifelong loan (LLE) equivalent to four years of education after 18 years (i.e. £ 37,000 in today’s fees) to support students in studying, teaching, retraining or upgrading their skills. at any stage of their training. lives through flexible and modular courses.
This is a seismic shift in how education after the age of 18 is funded and accessed, providing more opportunities, opening up opportunities and improving social mobility.
Changes in student funding are accompanied by broader reforms in higher education – supported by almost £ 900 million in new investment over the next 3 years – to transform the sector, provide more pathways to higher and technical education and lifelong access to credit. This includes providing more funding for courses that support the NHS, such as medicine, dentistry and obstetrics, and science and technology. This is the largest increase in public funding to support students and study in the higher education sector in the last ten years.
This announcement, along with current skills reforms, including measures in our Bill on Skills and Education after 16 years, ensures that everyone, regardless of their background, can get the skills they need at any stage of their lives to get started. work. an exciting career or retraining and advanced training for a new role.
We are investing another £ 3.8 billion in skills during the work of this Parliament, and our flagship programs are training, T-level and the right to a lifelong loan. In the White Paper on Leveling Up, the government has identified a new skills training mission that will target 200,000 more people in England to help them complete high-quality training each year by 2030 at the lowest skill level.
Sir Philip Ogar, chairman of the Education Review Commission after 18 years, said:
The Skills Bill is already under way in Parliament, the right to lifelong learning, student funding reforms and the reorientation of higher education provide equity, sustainability and the potential for the whole economy to move forward. The package is in line with the spirit of the report of the Commission on Education after 18 years, which I had the privilege of chairing, and forms the basis of a properly linked sector of further and higher education. This connection is long overdue.
Robert Colville, director of the Center for Policy Studies said:
It is gratifying to see that the government is focusing on value and quality for both students and taxpayers, and is acting to address some of the most unfair aspects of the current system that we have highlighted in our study. In particular, ministers are welcome to consider the extortionate level of interest on student debt and how a minority of low-quality courses tarnish the reputation of the higher education sector – and the prospects of students attending them. It is also gratifying to see that there continues to be a focus on learning and lifelong learning as part of ongoing efforts to diversify higher education beyond the traditional three-year degree.
Will Tanner, director of Onward, said:
For too long, many young people have been encouraged to obtain unsuitable academic degrees that do little to help their careers or even leave them in a financial position. The government is right if it stops this, and I hope that universities will work with ministers to eradicate substandard courses and make sure every young person is on the right track.
These reforms, combined with a new generous national scholarship scheme for low-income bright young people, can transform higher education for the better and help young people build a better future, regardless of their background.
James Kirkup, director of the Social Market Foundation, said:
The right to a lifelong loan has the potential to give more people opportunities offered by the UK’s excellent universities and colleges, which will only become more important as life expectancy and careers increase. It is a chance for education providers and employers to work together to offer more people new and flexible ways of education that benefit learners and the UK economy.
Graduate learning is another good example of such a partnership, which demonstrates how different parts of the education system and skills can come together to offer new opportunities and support a more productive economy.
David Goodhart, Head of Skills and Training at the Policy Exchange think tank and author of Head, Hand, Heart: The Struggle for Dignity and Status in the 21st Century (Penguin):
These measures are another important step towards balancing post-secondary education and training. For too long we have been educating educated young people with low quality diplomas who cannot get a job in graduate school, while employers are desperately looking for people with intermediate technical and digital skills. The right to a lifelong loan should also help undo the fall of part-time and full-time students in higher education, while targeted investments enhance those higher academic skills we need in the STEM disciplines.