Ben Towse, NUS Postgraduate Committee
After years of denial and dismissal, the government has quietly admitted that the fee and loan system it introduced for undergrads starting in 2012 in the face of the mass protests of 2010, and later extended to further education (FE) students over 23, is “unaffordable in the long term”. Our protests and criticisms, derided at the time, have been vindicated, but it is a bittersweet victory. Repayments on the loans are lower than initially expected, because the repayments are determined by income, and too many graduates will be on low incomes because of the Tories’ low-wage austerity economy. Now the government wants to reduce the national debt further. So instead of going for those who can afford it – by taxing the rich and businesses – they propose to gouge billions of pounds out of students and graduates, by increasing repayments on all post-2012 loans, changing the terms students signed up to when they started their courses.
Changing the repayment threshold
The policy was buried in the recent Budget, and three days ago the Department for Business, Innovation & Skills (BIS) opened a consultation. When the post-2012 loans were introduced, repayments were to taken from income over £21,000, to protect lower-waged graduates. In order to keep that threshold the same in real terms, from 2016 it was promised to rise in step with average incomes. The Tories now propose to freeze that threshold at £21k until at least 2021 – so as inflation and living costs rise, the threshold will fall in real terms, meaning repayments are increased, and lower-waged graduates who would not have expected to make repayments will now have to.
The second, less preferred option presented is to freeze the repayment threshold in a similar way, but only for new borrowers – i.e. students starting in 2016 and later. The government does not like this option because it will make it less money and that money will only come in from 2020 onwards, failing to contribute to their political target of paying off debt during this Parliament. Maintaining the system the Tories introduced just 3 years ago, and not changing the repayment terms for anyone, is barely considered an option in the consultation – it is described as “unaffordable”.
Raiding the pockets of lower- and middle-income graduates
What will the impact of these retrospective repayment hikes be? Andrew McGettigan says about 2 million borrowers will be affected. The government projects that graduates on starting salaries of £21,000 to £30,000 would repay an additional £6,100 each over the lifetime of their debt before the remainder is written off at the 30-year mark. Graduates starting at £40k, who would previously have expected to pay off virtually their entire debt before the 30-year mark, will repay just £300 more under the new system. And those lucky few starting on £50k will actually pay slightly less in total under the new system than the old one, as the increased repayments will ensure they pay off their debt sooner, before interest accumulates! So this policy directly raids the pockets of middle and lower earners, leaving the better-off largely unaffected or even richer.
The government expects to make £3.2 billion in extra repayments from existing undergrad borrowers, and an unspecified additional amount from future students. By comparison, they will make just £35 million out of existing FE borrowers, in part because these students will be repaying out of lower salaries. FE loans seem to be included in these changes not because the government has considered a case for doing so, but because it would be bureaucratically too difficult to separate them out of the undergrad-focussed loan system they were bundled into in 2013. The consultation gives almost zero attention to the effects on further education.
Crossing a line
This is not only an injustice in terms of the regressive gouging of even more cash out of graduates. Crossing this line, showing the government is willing to retrospectively alter the terms of repayment, and setting the precedent that student debt holders are a piggy bank that can be raided any time the state needs some spare cash, could have a grave effect on prospective students’ willingness to take on debt and enter university or post-23 FE study. When introducing this system, the government made much of how prospective students need not worry about taking on debt, as it would only be paid off “when they could afford it”. How are students, particularly those without the safety net of wealthy and supportive families, supposed to be encouraged to take up study and get into debt if the repayment terms can change at any time on the whim of the government? The effect on widening access could be grave.
So too could the effect on choice of courses. If the government can change repayments at any time, the pressure is on to get high-paying jobs that will pay off more debt faster, before the next government policy swerve. Why risk delaying repayments? Students will be pushed even harder to abandon academic exploration and focus only on the subjects that will net us the most lucrative jobs.
We have to stop this – and we can
The student movement must fight the threat of both retrospective and future changes to increase repayments. We will defend current students and graduates, but we won’t sell future students down the river either. Instead, all increases must be stopped, and then fees, loans and existing debt should be scrapped and replaced with free education and living grants for everyone in further and higher education. The government should tax those who can afford it instead of raiding us to bail out their economic problems.
It will not be enough for NUS and student unions to write polite responses to this consultation and wait for the government to respond. We need to kick off serious action, including protest and direct action, and we need to do so as soon as possible. The NCAFC National Committee is holding a meeting open to NCAFC members next week to discuss stopping the maintenance grant cuts, and this issue will be on the agenda too. Join us to plan the fightback.