Postgraduate loans may be limited to students in STEM fields

The Autumn Statement is likely to unveil a new loans system amid concerns over funding and who will have access to the scheme

November 27, 2014

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Theoretical solutions: schemes recommended to help postgraduates include government loans of up to £10,000

The government may seek to limit a new postgraduate loans system to students in science, technology, engineering and mathematics subjects as it prepares for an announcement in next week’s Autumn Statement.

The question of whether to allow other European Union students access to a postgraduate loans system, or how to prevent such access, may also prove to be an issue with immigration and the rise of the UK Independence Party high on the political agenda.

George Osborne, the chancellor, is expected to include a postgraduate loans system in his statement on 3 December, a move that the coalition government would seek to brand as an aid to social mobility and individual aspiration. However, some in the sector believe that Mr Osborne is likely to express an ambition for a loans scheme rather than outline a specific system, and to state that details will be finalised only after further rounds of discussion and possibly not until after the general election in May.

Concerns over costs would be the key factor that might cause hesitancy in the government, while the influential Russell Group has voiced its scepticism over a “one-size-fits-all” state-backed system.

‘It’s important for social mobility’

Most sector observers believe the government is considering the postgraduate schemes recommended by the thinktanks CentreForum and the Institute for Public Policy Research. They have called for government-provided loans offering funding of up to £10,000 with individuals repaying 9 per cent of their earnings between £15,000 and £21,000 (the latter figure being the threshold at which undergraduate loan repayments start in the post-2012 system).

Another option could be an equivalent of the Help to Buy housing scheme, with the government offering its guarantee to allow postgraduates to obtain bank loans.

Vince Cable, the business secretary, told Times Higher Education at last week’s Association of Colleges conference: “We are keen to develop postgraduate loans…It is an objective of the government because it’s important not just for qualifications and skills but also for social mobility, so we do recognise the need.

“The problem is, of course, the constraints on government finance, if it has to be subsidised. Banks have been very reluctant to provide loans on reasonable terms.”

The idea of limiting the loans system to postgraduates in STEM subjects has been discussed within the government. Such a limitation would lower the costs of the scheme, as well as fitting with the priorities of some in business and industry.

Pam Tatlow, chief executive of the Million+ group of newer universities, said it would be a mistake to limit the scheme to STEM postgraduates, noting that “the creative industries are a growth sector of the economy but not all graduates who enter these industries have a STEM background”.

Ms Tatlow added that ministers “need to be very clear where the funding required to kick-start the scheme in the first instance would be found”, without resorting to cutting funding for disadvantaged undergraduates.

Wendy Piatt, director general of the Russell Group, said that “whilst government-backed loans may help some students we’re concerned that a one-size-fits-all approach to student finance is unlikely to be appropriate or effective. We would also be very concerned if the new loan system created additional regulation and significant costs in the future.”

Some supporters of postgraduate loans argue that the government should not be deterred by the cost of the portion of loans that will never be recouped – an estimate, known as the resource accounting and budgeting charge, that has risen to 45 per cent in the undergraduate loans system.

David Willetts, the former universities and science minister, last week told the House of Commons in relation to the undergraduate system that the RAB charge “is not a fixed cost, a cost that is being incurred today or public expenditure, but, essentially, a highly speculative forecast of what income tax receipts might be up to 2050”.

However, the Treasury may not be so easily persuaded to embark on another RAB charge venture – and hence may seek limitations on the postgraduate scheme. Regardless of the level of impact that RAB has on departmental spending, the loan outlay would increase the level of public sector debt as a percentage of GDP, which the coalition government is seeking to lower.

CentreForum’s 2011 paper on postgraduate loans, written by Tim Leunig, now an adviser in the Department for Education, called for loans to be classed as being for maintenance, rather than fees. In principle, that would make EU students ineligible.

But any classing of the loans as maintenance would have to be “credible”, some warn, otherwise there may be a risk of the Westminster government facing legal action from the EU.

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