An explanation of the current proposals
WHAT THIS MEANS FOR STUDENTS
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Everyone will get higher education free at the point of entry. No one will be asked to pay for university upfront.
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Over half a million students will be eligible for more non-repayable grants for living costs that they do now
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Almost one million students will be eligible for more overall maintenance support than they do now
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All students can get at least £3,575 per year to help with their living costs; rising to more than £7,000 per year for those from the poorest families, and higher for those studying in London.
Students from low-income households
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We are matching Lord Browne’s generous non-repayable grants of £3,250 for the poorest students (those with household incomes up to £25,000). This is an increase of nearly £350. Taking into account increases to both grants and loans, these students will be over £700 better off than under the current system.
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A student with a household income of £25,000 will have access to a full non-repayable maintenance grant of £3,250 and a maintenance loan of £3,875; that’s £7,125 support a year.
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We will provide more overall maintenance support than Browne proposes for those with household incomes up to £35,000. A student with a household income of around £35,000 will have access to a non-repayable maintenance grant of £1,432 and a maintenance loan of £4,784; that’s £6,216 support a year.
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There will be an extra £150m for a new National Scholarship Programme for students of more modest means – offering free first year or free foundation year.
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Universities that charge the highest tuition costs will be expected to invest more in attracting and supporting the poorest students.
Students from middle-income households
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Compared to now, we will give more maintenance grant to those with household incomes up to £37,500 and make available some non-repayable maintenance grant for those with household incomes of up to £42,600.
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This means that compared to now there will be more overall maintenance support to those with household incomes up to £45,000.
Students from high-income households
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A student with a household income of £62,000 and above will have access to maintenance loan of £3,575.
Part-time students
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Part-timers studying at least one-third the intensity of a full-time course and full time distance learners will no longer have to pay fees upfront.
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Instead of means-tested grants – which only a small proportion of students are eligible for, and often do not cover the cost of a course – all will receive full loans to cover tuition and after graduation will be able to defer paying until they are earning over £21,000.
WHAT THIS MEANS FOR GRADUATES
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No one will have to contribute towards the cost of university until they are earning £21,000 (up from £15,000).
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Graduates would only be expected to contribute at a rate they can afford: 9% of their earnings above £21,000, and all contributions will be written off after 30 years.
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All students will repay less per month under this scheme than under the current scheme, meaning graduates can keep more of their income.
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Interest rates will vary according to earnings. Nobody with earnings below £21,000 will pay a real rate of interest. And above this level the interest rate will increase gradually until at £41,000 the maximum interest rate of 3% above RPI will be charged.
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The lowest earning 25% of graduates will pay back less than now
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The top 30% of earners will pay back more than they borrow and are likely to pay back more than double the bottom 20% of earners.
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The lowest earning 40% graduates will benefit from having their outstanding balance written off after 30 years.
Low earning graduates
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Will not have to repay until they’re earning £21,000
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If earning less than £21,000, will be protected from the real interest rate so their balance will not increase in real terms.
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Because this is a more progressive system, many will contribute less – around 25% of graduates will pay less than they do now.
EXAMPLE – A graduate with an obligation of £30,000 and earning below £21,000 will make no contributions and have a 0% real interest rate, so their balance at the end of the year will increase with RPI only to £30,825 (no higher in real terms).
Middle earning graduates
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Will also benefit from some interest rate protection as the rate will increase according to earnings, from RPI for those earning £21,000 up to RPI+3% for those earning £41,000.
EXAMPLE – A graduate with an obligation of £30,000 and on £25,000 income will contribute £360/year (£6.92/week), with an interest rate of RPI + 0.6%. Assuming RPI at 2.75% their balance at the end of the year will be £30,645
High earning graduates
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Those who go on to high earning jobs will be expected to contribute more than they do now. Anyone earning above £41,000 will pay a higher rate of interest (RPI+3%)
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But these graduates will still only pay at 9% of earnings above £21,000 so the amount of disposable income they have available to them will not decrease. And they too will have any outstanding balance written off after 30 years.
EXAMPLE – A graduate with an obligation of £30,000 and earning £45,000 income, will contribute £2,160/year (£41.54/week) with an interest rate of RPI + 3%. Where RPI is 2.75% their balance at the end of the year will be £29,565
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Sarah Palin Food Inflation Controversy
I found your comments interesting thus I’ve added a Trackback to it on my weblog 🙂
I cannot understand what all the fuss is about – except that the NUS leadership are close to the Labour Party, and are stoking anxiety for tribal purposes.
For any prospective student from a poorer background, these proposals are much better than the current funding arrangement. They are much better that a graduate tax.
The problem have in understanding these proposals is that a) they have not been reduced to a strap line (do would be university students need strap lines? Help); b) the notional debt a student will acquire is a maximum repayment liability, not a true debt – the Building Society will not write off your mortgage after thirty years; c) the interest rate is not a market interest rate, showing that this maximum repayment liability is not a true debt; d) for some reason, the word ‘fees’ has been a red rag. As there will not be fees upfront, this is not rally a proposal to pay fees. As some university courses will be more expensive than others, the maximum repayment liability will be greater for those students who choose to attend courses that are more expensive.
The Government should have marketed this much more carefully, especially as LibDems had signed this pledge: ” “I pledge to vote against any increase in fees in the next parliament and to pressure the government to introduce a fairer alternative”.
As Paul explains above, the alternative is fairer. Frankly, I’m sure the LibDems were the force behind these fairer proposals. They have allowed themselves to be stuffed by the Tories who want to use this opportunity to almost completely scrap the central funding of university teaching, an idea unrelated to the reform of student finance.
I’m not a LibDem. I think the LibDems have done well in these reforms, only to be squeezed by the Tories and by Labour. You need to fight your corner on this much better than Clegg is currently doing.
As a student who took part in the Anti Vietnam demonstartions it is a shame that more students did not engage in opposing Labour’s illegal Iraq invasion.
However I do recognize that changing these tuition fees (another Labour Policy) is not popular and is a difficult issue.
Paul,
I commend you for putting forward examples but, let’s be honest, they have little bearing on reality. In the first two examples, the stock of debt continues rising, hardly sound advice for someone trying to pay off a loan, and in the context of our current national debt crisis seem pretty hypocritical. You write that in ‘real terms’ the stock of debt is falling but this is just economic gobbledy-gook as the student’s earnings are less than the stock of debt in both cases the balance will always be against them, i.e. in reality their debt will increase. Furthermore, even if a student’s earnings reach the level of debt, will they have annual salary increases in line with inflation ? or be able to keep a job every year? And 30K looks pretty low if they are paying 27K in fees (will they live in tent?)
I feel extremely sorry for students. I worked in part-time jobs throughout my university education and received some help from the government. My god, I’m grateful to have left with only moderate debt. Debt is debilitating and to put so much on young people just isn’t right. It will make it more difficult for them to get on the housing ladder and put them off having a family, if they choose to go to university at all. Under the proposed system, I would not have gone to university. I urge you to vote against the bill, it closes off so much opportunity for young people who families are not rich.
Best regards,
Karen
Can it please be confirmed whether, as at present, students are free to pay the increased level of fees upfront? The proposals mention early repayment fees and state that no student ‘will have to’ pay upfront – but do not make it clear if they will be able to do so, should they wish