At debt’s door

At debt’s door

Sir Peter Lampl on the implications of today’s Degrees of Debt report.
Peter Lampl on April 28, 2016

Sir Peter Lampl on the implications of today’s Degrees of Debt report

For some time, I’ve been worried about the levels of debt being amassed by British students. I backed the increases in tuition fees to £3,000 back in 2004 because I could see that it was necessary to fund universities. But then there was a fair trade-off:  taxpayers and graduates shared the cost fairly. The coalition’s decision to treble maximum tuition fees for English undergraduates, whilst adding real interest of inflation plus up to 3%, has completely changed the ball game.

Having lived and worked on both sides of the Atlantic, I’ve heard the debt debate here and there. With our US Programme, we’ve had over 150 British students already benefiting from the generosity of leading American universities who pay all costs, tuition and living, that enable low and middle income students to graduate debt-free. At the same time, the removal of maintenance grants here coupled with £9,000 tuition fees  means that similar students here will soon face debts of £50,000 and more.

Today’s Degrees of Debt report lays bare how the systems compare. With student debt a big issue in the US Presidential election campaign, it is ironic that the average English student faces debts more than twice as large as their American counterparts.

We looked at the systems in the four UK nations, the US, Australia, Canada and New Zealand and shows that English students now face debts far higher than anyone else in the English-speaking world. But, that’s not whole story: many graduates won’t repay the debts in full, which reduces any gains the Exchequer might have hoped for.

Of course, it is true that although English undergraduates are facing the highest debts internationally, the repayment system in the UK is income-contingent and relatively straightforward. In the US, a large amount of student debt is held by private lenders, which typically have tough repayment terms, and federal loans are not all income-contingent. This can make repayment of debt, even though it’s much smaller, more difficult for US students.

But that can’t hide the reality that young people in England are still leaving university with large and ever increasing debts. The size of this debt weighs increasingly heavily on graduates, however manageable it may be. With those in typical graduate-level jobs repaying loans through their 40s, it can’t but affect mortgage affordability, decisions on having children and family finances. With postgraduate loans still inadequate, it deters graduates from academic careers or from the Masters’ degrees that are increasingly important in the jobs market.

It reinforces the argument highlighted by work carried out by The Boston Consulting Group on our behalf which showed that except for the Russell Group universities, a degree level apprentice has higher lifetime earnings than a university graduate.  A better option for many young people would be a high level apprenticeship where you earn while you learn, incur little or no debt and develop skills which are greatly valued in the workplace.

While the numbers of young people accessing university has held up despite high tuition fees, mature and part-time students have declined dramatically by 18% and 40% respectively.  These are where less affluent students tend to go and hence high tuition fees have a significant negative impact on social mobility.

 

Peter Lampl | | Category: Social Mobility, Student finance and debt