CEO Blog: Loans are not debt? Tell that to students

05 Jun 2017

A cursory glance at every UK university website confirms the competition to recruit students based on glowing descriptions of the student experience on offer in each institution. For modern universities, the student experience is no false promise but part of our DNA. As a result, modern universities are world-leaders in attracting and supporting students of all ages, backgrounds and communities.

For their part, Ministers in the Conservative government were fond of referring to students in England as consumers – a description that students question – but which fits with the idea that higher education is a market in which goods (education) are bought and sold. Inevitably such an approach leads to the proposition that if education is to be accessible, prospective students need to be rich enough to have the money to pay upfront or be lent the money to purchase their education with the highest ticket price in England set by Ministers themselves. Of course, being lent the money is not a free lunch. Student loans increase because interest rates are applied (up to 6.1% from 2017) and must be repaid over a thirty-year period.

It therefore seems bizarre that some commentators want to claim that these loans are not debts because at the end of the repayment period any money still owed, will be written-off. This is not how students or many of their families see it. Indeed, it is not how mortgage companies see it either, since they ask applicants as standard practice to identify their student loan repayments.

There is, of course, a different way of looking at higher education and that is to see it as a general good that benefits not only individuals but also wider society and the economy.

In this analysis, you may come down on the side of concluding that higher education tuition fees of £9,000 per year are past their sell-by date and that tuition should be free. While some economists highlight the costs of such a policy (apparently forgetting that under the current system the government is already borrowing to give the student loan company the money to offer students loans to then pay their universities - an administratively Byzantine system if ever there was one), for at least some students and prospective students it has its attractions.

Without coming down on one side or the other, MillionPlus has argued that there are major questions about the sustainability of the current funding system and its perceived affordability by students which should not be ignored and which impact, in particular, on those who would like to access higher education later in life.

As we wrote when we published our general election manifesto last month:

“There are concerns that the higher education funding system in England is becoming less sustainable and is seen as less affordable by both full-time students and those who want to study part-time or return to education when they are older.

“Reviewing the funding system and the contributions made by students and graduates to the costs of their higher education have the potential to be more cost-effective for taxpayers in the long-run and to help people who did not have the opportunity to study for a degree when they were younger, to study at university on a part or full-time basis later in life.”

Whatever the outcome of the general election, universities and their representative bodies would be unwise to simply ignore the views of students, many of whom feel that enough is enough.