A Treasury document published immediately after today’s Autumn Statement puts the “net cash” cost of the loans at £1.5 billion over the first four years of the system.
The loans are scheduled to be available from 2016-17, while the government says the plan could increase the numbers of students entering postgraduate study by about 10,000 a year.
The Treasury also made clear that the loans would be available only to students under the age of 30, dealing a blow to mature students.
The loans will be repaid “concurrently” with undergraduate loans – under which graduates repay their loans only if they earn above £21,000 a year – according to the Treasury document.
And the Treasury also says that while it will “consult” on the detail of the plans, “one way” to structure the postgraduate loans would be to have an interest rate of RPI plus 3 per cent, repayable at 9 per cent of earnings above £21,000.
The Department for Business, Innovation and Skills said that there will be “a public consultation to inform the detailed design of the scheme during the first few months of 2015”.
Mr Osborne said in statement in the House of Commons: “A year ago, I abolished the arbitrary cap on the total number of undergraduates at our universities. Today, I am going to revolutionise the support for our postgraduate students too. Until now there has been almost no financial support available, and the upfront costs of postgraduate degrees deter bright students from poorer backgrounds.
“So today, across all disciplines, we will make government-backed student loans of up to £10,000 available, for the first time ever, to all young people undertaking postgrad master’s degrees.”
By making clear that the loans would be available across all subjects, Mr Osborne ended suggestions that funding could be limited to students in science, technology, engineering and mathematics subjects – a proposal that had been considered within the government.
The Treasury document cites increasing demand for high-skilled labour and the need for social mobility as reasons to introduce a postgraduate loans system.
“The loans are designed so that, on average, individuals will repay in full, in recognition of the high private return to individuals, but they will beat commercial rates. The government will consult on the detail and will confirm the delivery plan,” the Treasury says.
It adds that the plan is “expected to benefit around 40,000 students, and enable around 10,000 more individuals to take advantage of the opportunity to undertake postgraduate study each year”.
And the Treasury continues: “To support students until these loans are in place, the Higher Education Funding Council for England will allocate £50 million in 2015-16 to universities to offer bursaries on a match-funded basis. These will be £10,000 each and will benefit 10,000 students.”
The Treasury’s document puts the “net cash” requirement of the postgraduate loans at £300 million in 2016-17, and at £425 million, £395 million and £365 million in the three years after.