NUS ‘deeply disappointed’ by UUK stance on Osborne loan freeze

V-cs fail to oppose repayment threshold plan attacked as ‘unfair retrospective change’ by GuildHE

October 21, 2015
George Osborne, Conservative Party, Chancellor of the Exchequer

The National Union of Students is “deeply disappointed” that Universities UK has failed to oppose the government’s plans to make existing students pay more for their loans.

UUK, the vice-chancellors’ body that represents the sector in talks with the government, has now released its response to a Department for Business, Innovation and Skills consultation on the plans, which closed last week.

UUK holds back from directly endorsing the government’s preferred option – to freeze the £21,000 threshold at which loan repayments start for five years, affecting all existing students and graduates who took out loans after 2012 – instead noting advantages and disadvantages to the two different options.

But it notes only disadvantages to the government’s following its original commitment, to uprate the threshold in line with earnings. This would not aid long-term sustainability of the student loans system, and the original commitment was made at a time when earnings growth was projected to be higher than it has proved in reality, UUK says.

GuildHE, the sector’s other representative body, has said in its consultation response that it is “absolutely opposed” to the government’s preferred freeze option, calling it an “unfair retrospective change”.

The plan to freeze the threshold was originally announced by George Osborne, the chancellor, in his summer Budget.

Yet in 2010, David Willetts, then universities and science minister, told MPs as the government sought their votes to push through the trebling of tuition fees to £9,000: “We will increase the repayment threshold to £21,000, and will thereafter increase it periodically to reflect earnings.”

The five-year freeze would mean graduates paying an extra £2,800 on average, according to estimates in a Sutton Trust report.

The BIS consultation outlines two options: the preferred option of a five-year freeze until April 2021 (which would affect existing borrowers), and an option to freeze the threshold for five years for new borrowers only. Sticking with the original plan and uprating the threshold in line with earnings is mentioned in the consultation, but not listed as an option.

“Universities UK believes that the freezing of repayment thresholds is preferable to alternative measures to reduce long-term costs of the student funding system, such as reducing student places or the level of funding per student, both of which would lead to a negative impact for students, the government and universities,” says the organisation’s response.

“Specific advantages” of the government’s preferred option are that it “contributes to government fiscal targets”, is “more straightforward to administrate”, “reduces the long term cost of the student funding system” and “retains the progressive nature of the current student funding system”, UUK says.

Disadvantages cited by UUK are that “repayments will increase for current borrowers” and “potential impact on confidence in the student loan system” if students become concerned by the possibility of further changes to loan terms.

Sorana Vieru, NUS vice-president for higher education, said: “I’m deeply disappointed to see Universities UK not coming out in stronger opposition to the government’s plan to freeze the loan repayment threshold.

“Vice-chancellors should be aware that their students are already facing a serious cost-of-living crisis, and this regressive policy will have a serious impact on graduates, particularly the most disadvantaged.”

Andrew McGettigan, a writer and researcher on higher education and author of The Great University Gamble, said: “UUK’s response recognises the potential impacts on recruitment but fails to address two main concerns. First, as the IFS [Institute for Fiscal Studies] has shown, the proposed freeze combines with changes to maintenance support from 2016-17 to create a tax on social mobility – those from poorer backgrounds moving into higher paid careers will repay much, much more than their peers.

“Second, UUK do not mention the plans to have future, regular reviews in both proposed options. This makes it impossible for potential student to assess likely costs and makes it rational to avoid full-time study away from home in London so as to minimise exposure to a series of regressive changes on top of this one.”

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Print headline: UUK stance on student loans draws NUS’ fire

Reader's comments (1)

The UUK’s response is extremely disappointing. All they feel able to say about retrospective changes in the student loan terms is that they may impact ‘confidence in the student loan system’. They point out that in 2010 the Secretary of State at the time committed to increasing the £21,000 repayment threshold by average earnings from 2016, but muddy the water by saying there was an the initial plan to do so every five years. There may have been discussions of such a proposal within Government, but the first public declaration about uprating announced an annual increase. Also, there is no recognition that the universities themselves went out of their way to reassure students not to be worried about the hike in fees because of repayment terms as announced. Neither Ministers, nor the Universities, warned those 2012 entrants that about the get out clause which meant those reassurances might turn out to be unsafe. The UUK is keen to repeat the mistake that led to the current affordability problems, by relying on forecasts of future nominal growth in average earnings. Recent history shows that these cannot be relied upon. The resulting uncertainty means that future reviews are proposed, something that UUK ignore, as Andrew McGettigan was quoted as pointing out in the article. The submission quotes the research which shows that students not been overly concerned about the prospect of repaying loans. But that was based on the reassurances they had received, not on the idea that there loans terms could be repeated revised. The only risk identified is to participation, ignoring the other consequences, like excessive term time working leading to lower academic achievement.

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