HELP could force graduates to clear debt faster

University Alliance says repayment period of 15 years under HELP UK system could plug black hole in funding system

June 26, 2014

Asking graduates to repay their student loans at a faster rate and in full could resolve a “black hole” in the current system, according to University Alliance plans for a “HELP UK” loan system.

The mission group published on 26 June the outline of a Higher Education Loan Programme – a term borrowed from Australia – requiring little or no public subsidy that could grant postgraduates and undergraduates “lifetime loan allocations” to be used for tuition fees or living expenses.

Libby Hackett, University Alliance chief executive, said that the current loans system, under which, it has been estimated, 45 per cent of loan outlay will never be repaid, creates a “black hole in the public finances”.

She told a press briefing on 23 June that HELP UK could be rolled out in stages: first to postgraduates; then to undergraduates barred from the current loans system, such as those studying second degrees; and finally to undergraduates who can access funding now.

Repayments would be triggered once a graduate earns £21,000, as under the current system. But rather than the 9 per cent of total income above £21,000 that is now levied, under the alliance’s proposals graduates would face monthly repayments of between 4 per cent and 8 per cent of their total earnings. For a graduate earning £25,000 a year, repayments would rise from £30 a month to £83 a month, Ms Hackett said. The “typical” repayment period would be 15 years.

Ms Hackett countered suggestions that raising graduate repayments would be politically impossible. She said that surveys of students and parents, commissioned by the group for the study, showed that “by a margin of 2:1” those surveyed would prefer student loans to be paid back over a shorter time rather “than longer with similar monthly repayments” to the current system. She added that there were options to use HELP UK within the current £9,000 fee system, or to support lower fees, or to introduce a system of fee bands for different subjects.

The plan offered savings on loan write-offs, which could be used to reintroduce the direct teaching grant.

Asked if Russell Group vice-chancellors favouring uncapped fees would be opposed to the alliance plans, Ms Hackett pointed out that there could be a “distinction between the fee maximum and the loan maximum”, allowing universities to charge fees higher than any borrowing limit.

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