Spending review: student funding shake-up announced

Government relaxes student loan eligibility rules but confirms plan to freeze repayment threshold, as student opportunity funding also targeted

November 25, 2015
Piggy bank and books

A major shake-up of student funding was announced in the government’s spending review, including the relaxation of the age cap for postgraduate loans, the introduction of maintenance loans for part-time students, and a loosening of the rules on tuition fee loan eligibility for students wishing to do a second degree.

However, the government also confirmed that it will go ahead with its controversial plan to freeze the repayment threshold for student loans, and said that student opportunity funding for disadvantaged and disabled learners would be reduced.

Loans for taught English-domiciled master’s students were announced in last year’s Autumn Statement and the government had originally planned to restrict these to students aged under 30.

However, universities and student groups had warned in a consultation that this would exclude some of the students who needed support most and, in its response, the Department for Business, Innovation and Skills says that it has been persuaded to increase the age limit to 60.

Other areas of the eligibility criteria have also been widened, meaning that English students will now be able to use the loans to study at universities elsewhere in the UK, and students following their course via distance learning will also be covered.

In addition, students on research master’s courses will also be eligible for the scheme, which will be introduced next September, and the repayment rate for postgraduate loans has been reduced to lessen the burden on students who will be concurrently repaying undergraduate loans.

Universities and campaign groups had also called for increased support for part-time study, and the Treasury’s spending review document confirms that maintenance loans for part-time students will be introduced in 2018-19, in a move that the government says could benefit 150,000 people by 2020.

Another barrier to part-time and mature study had been rules on tuition fee eligibility that prevented students from accessing finance for courses that were considered equal to or lower than qualifications that they already held. In response, the Treasury says that students wishing to study a second degree will be able to access a tuition fee loan from 2017-18, providing that the course that they wish to study is in science, technology, engineering or mathematics (STEM).

These changes will be paid for with a number of savings, which include confirmation of the decision to freeze the repayment threshold for student loans.

The government announced in July that it wanted to fix the salary at which graduates are required to start repaying their loans at £21,000 for five years, arguing that it would save the government £3.2 billion over the course of the loans.

Campaigners strongly criticised what would be a retrospective change to loan terms and, in a consultation response published today, the government confirms that 84 per cent of consultation respondents had opposed the change. Only 5 per cent were in favour.

Analysis in the document of the possible impact of the changes says that middle earners are likely to be hardest hit, and existing borrowers with average lifetime earnings of between £20,000 and £35,000 a year are expected to make extra payments totaling an average of £4,000 over the 30-year span of the loan.

The document adds: “Women, ethnic minorities, people with disabilities and mature students are more likely to fall into the range of income that is most affected.”

However, the government says that it will go ahead with the proposal because, the document says, “we must live within our means”.

“While loan outlay continues to rise, we now forecast that repayments will not be made at the level that was originally expected,” the document says. “All departments are required to support government’s efforts to reduce the national debt. With such large amounts of money being loaned the HE system in particular has an important role to play.”

Nick Hillman, director of the Higher Education Policy Institute, said that the spending review “could have been worse”.

“The improvements to postgraduate loans, the new support for part-time students and the protection of research spending are all welcome and better than many people feared,” Mr Hillman said.

However, Mr Hillman said that cuts to the BIS budget would still “end up hitting higher education institutions in one way or another”.

Sally Hunt, the general secretary of the University and College Union, said that Mr Osborne’s main funding solution “appears to be extending loans and loading more debt onto students”.

“This approach will lead to the poorest paying most for their education,” Ms Hunt said.

A further change announced in the spending review will allow dependants of postgraduates on courses of more than a year to come to the UK and work, provided that they meet English language requirements. 

Gordon Marsden, Labour’s shadow further and higher education minister, and a former Open University tutor, said the principle of extending maintenance loans to part-time students was “positive”. But he contrasted the government’s decision to cut teaching grant with the Green Paper’s stated commitment to teaching, saying there were “mixed messages”.

And on the decision to scrap student maintenance grants and replace them with loans, he said there had been “no formal or, as far as I can see, informal equality assessment” on the plans, which he believed could hit poorer students.

Dave Phoenix, vice-chancellor of London South Bank University and chair of Million+, said the moves on part-time and postgraduate student funding were welcome. But he added that the “possible 50 per cent cut in the Student Opportunity Allocation by 2019 in order to fund the additional costs of nursing and other allied health profession students being transferred to the student loan system, is deeply disappointing and a sting in the tale for universities which are at the forefront of both delivering innovative health education courses and widening access to university”.

Maddalaine Ansell, the University Alliance chief executive, also welcomed the moves on part-time and postgraduate students.

However, she added: “Given the vital role of Student Opportunity Funding, ministers must ensure that the cuts announced today do not undermine the Prime Minister’s ambitious goal of doubling the proportion of disadvantaged young people entering higher education by 2020.”


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