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1 August 2016

As loans replace student grants, the poorest graduates will leave with the most debt

University maintenance grants have been replaced by maintenance loans.

By Tim Wigmore

The poorest university students in England will now graduate with the most debt. From today, maintenance grants for the poorest students have been replaced by maintenance loans.

Under the changes, announced last year, maintenance grants, worth £3,387 a year for those from families with annual incomes of £25,000 or less, have been scrapped. In their place maintenance loans, which students used to receive in addition to grants, have been increased. The total support poorest students receive for their living costs has risen by £766 a year, from £7,434 to £8,200, and all this money is now added to their total student loan. But about half of all graduates will never finish their repayments, and so have their debt written off after 30 years. For these students, the switch from maintenance grants to loans will effectively have no impact at all: they will leave university with a higher notional debt figure, but they won’t actually pay back any more.

Yet young people are entitled to be aggrieved. The protection and enhancement of maintenance grants was one of the main justifications for the trebling of tuition fees from 2012, and has been critical in the number of disadvantaged students at university reaching a record high. “Relatively little attention has been paid to them compared to fees  I think they’re incredibly important psychologically,” Les Ebden, the Director of the Office for Fair Access, told me last year. The importance of grants is about to be put to the test.

The abolition of grants will mean that having wealthy parents will become more important in determining life prospects. If two people study the same degree at the same university, and then go on to do an identical job paying the same salary, the one who came from a poorer family will have student debt to repay for longer  and so find it harder to raise money to buy their first house, say, or to start a family of their own. This is not reconcilable with the idea of social mobility, so beloved of all politicians. 

The changes are consistent, too, with students being treated abominably by the government. Last November, the government announced that the £21,000 threshold at which students loans are repaid from, which they had previously vowed would rise in line with average earnings in April 2017, would not rise until at least April 2021. Effectively the government backdated changes in the repayment terms on loans that students had already signed up to, in a way that no bank would ever be allowed to do.

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It is unimaginable that pensioners would ever be treated in the same way, but that is the crude political logic created by a toxic cocktail of an ageing population and a chasm in turnout between the young and the old: in the 2015 general election, 78 per cent of over-65s voted, but only 43 per cent of under-25s. From next year, universities will be able to charge tuition fees of £9,250 a year, which will rise in line with inflation every year, and the rise could also affect students who have already begun their degrees. The inconsistency here is staggering: fees can rise with inflation, but not the threshold at which graduates repay them.

Already, the value of a university degree is being challenged like never before: the Intergenerational Foundation has just found that the average £100,000 graduate earnings premium is wiped out once National Insurance and income tax are taken into account. In this environment, leaving the poorest students with over £10,000 more in student debt – even though many will never pay it off – risks putting them off applying to university altogether. And the chasm between Theresa May’s vows to put social justice at the heart of her government and increasing the debt burden of the poorest students, simply because they happen to have the least well-off parents, is unmistakeable.