Student finance report finds reality falls short of policy, writes Alan Thomson
The government's student funding policies appear to be at odds with its aim of widening higher education participation among poorer people, says a report on student finance commissioned from South Bank University.
The report says debt aversion is greatest among the students most in need of student loans, those from the poorest households. "What is particularly worrying is that this debt aversion is concentrated among the most under-represented in the student population - those from the lowest social classes. Ultimately, these groups may be deterred from entry to higher education because of debt."
The most common reason given for not taking out a loan in 1998-99 was that the money was not needed - 29 per cent of students without loans gave this response.
Debt aversion came a close second, 26 per cent gave it as the reason for avoiding a loan. But the study notes that if this proportion is combined with the 11 per cent of students who were concerned about loan repayments in general, the total proportion of students concerned about the disadvantages of borrowing rises to 37 per cent.
This varied by social class. Some 48 per cent of students from classes IV and V were concerned about borrowing, debt and repayments, compared with 34 per cent of students in classes I and II.
Increasingly indebted
Lone parents studying full time were the most financially vulnerable student group despite having some of the highest incomes, according to the study.
Their average income over the year was £9,139, compared with £4,675 for single students without children. Their higher income was explained by their eligibility for grants and social security benefits.
Yet lone parents studying full time had the highest expenses of any group, predominantly costs associated with children. They also had the least savings, averaging £65 compared with £886 for those in social classes I and II.
As a result, lone parents were the most indebted group. On average, they owed £4,812, compared with an average £3,522 for a couple with children and £3,246 for single childless students.
In addition to their high take-up of loans (98 per cent compared with an average of 76 per cent), lone parents accumulated debt through more use of credit cards (44 per cent compared with a 23 per cent average), greater reliance on hire purchase (20 per cent compared with 3 per cent) and the fact that 22 per cent of lone parents were in arrears, owing an average of £488, compared with 5 per cent of other students, who owed an average of £2.
Total average income for full-time students rose by 12 per cent above inflation between 1995-96 and 1998-99, from £4,907 to £5,892. This was twice as fast as average growth in retail prices and higher than earnings growth.
But this has meant higher levels of debt for students as more of their income is borrowed in the form of larger loans against earnings after graduation. By 1998-99, 30 per cent of younger students' income came from grants and from their parents. In 1990, it was about 70 per cent. In the same period, younger students experienced a doubling in income from loans and suffered a real-terms drop in grant income and a 17 per cent fall in regular parental contributions.
Average total debt in 1998-99 was £3,287 for full-time students and £1,496 for part-timers. The study calculates that debt for younger students almost doubled between 1995-96 and 1998-99 from £1,645 to £3,266. Average debt for mature students rose from £3,059 to £4,061 in the same period. Only 13 per cent of students in 1998-99 were debt-free, compared with 25 per cent in 1995-96.
The chilling effect
Three out of five full-time students surveyed knew a friend who had been deterred from applying to university because of recent changes to student funding.
Among those, 68 per cent were from social classes IV and V, 68 per cent were black and a similar percentage were women aged over 25. The figures also show that more than two out of five part-time students knew people who had been deterred.
One in seven of all students, full and part-time, said that they nearly did not come to university because of their concern about the debts they would incur.
Of all full-time students, 87 per cent reported that they had some financial worries. The degree of financial difficulty reported was linked directly to a student's savings. Full and part-time students with the least savings were more likely to experience higher levels of financial difficulty.
Those least likely to need a student loan and most likely to have savings tended to be men in social classes I and II. The survey found that they had an average of £1,1 in savings, after adjusting for debt. Overall, 44 per cent of students (rising to 55 per cent of part-timers) in social classes I and II had savings, compared with 33 per cent from classes IV and V.
Those most likely to experience financial difficulties were more likely to consider dropping out for financial reasons. In all, 54 per cent of full-time students (49 per cent of part-timers) reporting the greatest hardship had considered dropping out because of money.
Only 21 per cent of those reporting no financial difficulty at all had considered dropping out. One in ten of all full and part-time students had considered dropping out for financial reasons.
Those students who had considered quitting because of financial problems were more likely to believe that financial difficulties were damaging their academic studies.
Where the corners are cut
One in four full-time students with dependent children said they had to economise on toys, children's books and entertainment because of financial hardship.
Just over one-fifth said that hardship meant economising on the amount they spend on their children's clothes and on pocket money. About 10 per cent had cut back on their children's school trips and outings, and 6 per cent had cut back on school lunches.
Those students experiencing financial difficulties also juggled bill payments. They borrowed to pay bills, which led to multiple arrears.
Lone parents and those from social groups IV and V were also less likely to buy the required course books. Some 67 per cent of lone parents studying full time did not buy required texts because they could not afford them. This compared with 37 per cent of all full-time students and 30 per cent of part-timers.
More than one-fifth of those part-timers reporting the greatest financial difficulties said they had missed going to university because they could not afford the cost of transport. One in seven of those full-timers reporting the greatest financial problems also missed lectures and tutorials. Only 1 per cent of those reporting no financial difficulties reported missing classes.
The report says: "Student loans aside, the key differences in students' overall finances were associated with their family and living circumstances and their social class backgrounds."
Who's got work to do?
Students from the poorest backgrounds are working longer hours to minimise debts.
Between 1995-96 and 1998-99, the average number of hours worked during term time in paid employment for full-time students from social classes IV and V rose by 15 per cent to an average of 181 hours. By contrast, average term-time hours worked by full-time students in classes I and II increased by 9 per cent to 126 hours.
The report says that although the reasons for these changes are unclear, it may be that "some of the poorer studentsI feel that they have no choice but to engage in paid work".
This would seem to be confirmed by the fact that students from social classes IV and V had the highest loan debt in 1998-99, taking out £1,415 compared with £1,372 for those in classes I and II. In the year of the survey, non-repayable means-tested maintenance grants were halved. Those available would have benefited students from poorer backgrounds most.
Maintenance grants were phased out the year after, not covered by the study, and bigger loans were made available. The assumption is that, since 1999-2000, poorer students owe even more than wealthier students, who presumably continue to get more support from their families.
The study estimated that a student starting university this year will graduate owing £13,160, although repayments are contingent on income levels. This sum amounts to 80 per cent of average gross annual earnings for full-time manual workers in 2000. Claire Callender, co-author of the report, said that would-be students from poor backgrounds may find such amounts a "psychological barrier".
The study shows that students from the wealthiest backgrounds had to work less because they received more money from parents and other family members than their poorer counterparts. The median annual amount received by those in the wealthiest two groups was £1,375, compared with £160 for those in groups IV and V.
Changing Student Finances: Income Expenditure and the Take-up of Student Loans among Full-time and Part-time Higher Education Students in 1998-99 is available from DFEE Publications, PO Box 5050, Sherwood Park, Annesley, Nottingham NG15 0DJ, priced £4.95.