English university graduates face higher debts on graduation than their American counterparts, and owe more than those in Canada, Australia and New Zealand, according to a new Sutton Trust report published today.
Drawing on the most recent published data from respective countries, Degrees of Debt shows that while the typical US graduate faces debts ranging from about £20,500 for students studying at public/ private non-profit universities to £29,000 at private for-profit universities, their English counterparts, graduating from last year under the new £9,000 fees regime, owe an average of over £44,000. Partly due to generous scholarships, the average graduate of private non-profit US universities, which include the Ivy League, finishes with £23,000 of debt despite the typical course lasting four years compared to three in England.
However, the report notes that UK graduates benefit from an income contingent system held by the state. These are compounded by interest rates of up to 3% over inflation, but some of their American counterparts face even higher interest rates, with loans that are not income contingent. While UK and Australian graduates can take a ‘repayment holiday’ when their income dips, only 19% of US students receiving the most common federal loans are enrolled on similar schemes.
The Sutton Trust is concerned that the abolition of maintenance grants this September (a reduction of government funding of £1.6bn) – which were reintroduced when tuition fees rose from £1,175 (depending on income) to £3,000 in 2006 – will leave the poorest students with debts in excess of £50,000. The government has also decided to freeze the threshold at which graduates start repaying loans at £21,000, which will accelerate the rate at which students pay back loans resulting in higher monthly payments.
Tuition fees in England are higher at an average of £8,800 (the maximum is £9,000) than for students going to a home state public university in the US (about £6,600). Fees for students out-of-state and at private universities are often higher in the US, but many have generous bursary schemes that offset fees for low and middle income families.
Sir Peter Lampl, chairman of the Sutton Trust and Education Endowment Foundation said today: “The massive increase in tuition fees from just over £3,000 to £9,000 per annum and the abolition of the maintenance grant results in the poorest English university graduates facing debts on graduation of over £50,000 with interest rates on the debt compounding at up to 3% over inflation.
“These debt levels are by far the highest in the English speaking world and are more than double average debt levels at universities in the United States, where students study for four year programmes, rather than three. They impact on the ability of graduates to go to graduate schools, to afford a mortgage, the timing of having children and other major life decisions.
“The cost of going to university has become so expensive that more young people should seriously consider higher level apprenticeships, preferably to degree level. By choosing this route they will earn while they learn, incur less debt, and develop skills which are greatly valued in the workplace. We need more good apprenticeships to offer genuine alternatives to university degrees.”
The report also highlights the growing complexity in arrangements in the UK nations, with different fee levels in Scotland for those from the rest of UK, for example, and grants in Wales that enable Welsh students to take up places at English universities for less than £4,000 a year rather than up to £9,000.
It also notes that while undergraduate recruitment for disadvantaged students has continued to improve since the introduction of higher fees, the numbers of mature and part-time students have fallen significantly.
The Sutton Trust is recommending:
• The Business, Innovation and Skills (BIS) Select Committee in the House of Commons should monitor and report on higher education funding and provision each year, assessing the impact of changes on disadvantaged students, as well as mature and part-timers;
• Better co-ordination between higher education ministers from England, Scotland, Wales and Northern Ireland to rationalise student funding policies across the UK;
• An investigation by the Office for Budget Responsibility (OBR) into the impact of the latest changes to grants and loans, to ensure value for money for students and taxpayers;
• Stronger evaluation of university spending of £750m a year on outreach and access programmes to maximise their impact.
Dr Philip Kirby, the report’s author said: “There are features of the UK system that are better than those in the US – particularly the income contingent loans collected by HMRC – but, with significant access gaps remaining, proper monitoring of the changes to student funding from this September is crucial.”
NOTES TO EDITORS
1. The Sutton Trust is a foundation set up in 1997, dedicated to improving social mobility through education. It has published over 170 research studies and funded and evaluated programmes that have helped hundreds of thousands of young people of all ages, from early years through to access to the professions.
2. Data cited here has been collected from several sources, which are gratefully acknowledged: for the US, the Institute for College Access and Success and the College Board; for England, previous analysis for the Sutton Trust by the Institute for Fiscal Studies and the Office for Fair Access. The data’s interpretation is the responsibility of the author.
3. Sterling figures over 10,000 have been rounded after conversion to the nearest 500; figures less than 10,000 to the nearest 100. Figures have been adjusted for inflation to 2015 prices, where necessary.
4. Our research brief Unfair Deal in September 2015 examined the impact on students of the changes to student loan terms announced in the 2015 summer budget. It found that disadvantaged students would be particularly adversely affected.