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Student fees may be coming down

July 22, 2019

A government-commissioned report has proposed significant changes to the funding of university students in England.

 

 

 

Students resident in England (different rules apply in other parts of the UK) pay a maximum university tuition fee of £9,250 per year, financed by a student loan. Further loans to cover maintenance plus interest at RPI+3% mean that at the end of a three-year course graduates can start working life with £50,000 of debt. That debt is currently written off after 30 years, but until then repayments must be made at the rate of 9% of income above a threshold presently set at £25,725.

 

At the time of the last General Election, the Labour Party’s manifesto proposed scrapping future tuition fees at an estimated cost of £11.2bn a year – the party’s most expensive single measure.  The idea was predictably popular in many university towns and may have been enough to swing the vote in some of them. After the election the government responded by setting up an independent review of 18+ education in England.

 

That review, headed by Philip Augar, published its report in June. There was a long list of recommendations, including:

  • Reducing the maximum tuition fee to £7,250;

  • Cutting the earnings threshold for repayments by £2,000;

  • Introducing means-tested maintenance grants of up to £3,000;

  • Reducing the interest rate to match inflation during the period of study;

  • Capping total loan repayments at 120% of the loans drawn, revalued in line with inflation; and

  • Extending the loan repayment period to 40 years.

The proposals have one consequence which has raised a few eyebrows: they would reduce the total outlay for the highest earning graduates while increasing it significantly for middle earners.

Whether or not these ideas are adopted, they are a reminder of the eye-watering expense of higher education, both for students and the government. If you have children or grandchildren heading to university, the sooner you start planning for that cost, the better.

 

 

Articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional. Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise.

 

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