David Willetts is President of the Resolution Foundation, a member of the House of Lords and was Minister for Universities and Science 2010-2014. His book A University Education is published by Oxford University Press
Bridget Philipson is right to increase university fees.
Every party flirts with alternatives in Opposition but faced with the realities of Government decide to go for fees.It would be nice if a government did prioritise higher education for more public spending but it is usually not even a priority for Education Secretaries who favour early years and primary schools.
So, if taxpayers are not going to fund higher education the best alternative is to expect graduates to pay.
This is entirely justifiable as it remains the case – contrary to some of the media narrative – that graduates by and large earn more than non-graduates. For 21-30 year-olds the median earnings of a non-graduate are £26.5k, for a graduate £31.5k and for a post-graduate £35k.
For adults of all ages the figures are £29.5k £40k and £45k.
It is fair for graduates to pay back if they can afford to.
But it is also right for the rest of us to meet their costs up front because they can’t pay when they are students and can’t borrow the full costs commercially. So, the state lends them the money – in practice paying the loan straight to the university. Then when graduates do well in the jobs market it is reasonable to expect them to pay back the investment they’ve benefited from.
We write off the loans of graduates who don’t earn enough to pay back their loan. About 60 per cent of today’s graduates should pay back in full and most of the rest will pay back something so that about 25 percent of loans are forecast to be written off. That leaves us with a system where the balance of private payment to public payment is one of the highest in the OECD.
Today’s students will only start paying back when their earnings are above the earnings threshold now set at £25k. So, a graduate earning £35k will pay 9 per cent on the top £10k of earnings which is £900 a year or £75 a month. This is manageable.
When I check with MPs very few have graduates complaining to them about their repayment terms.
Parents worry more than their children because they think that this graduate repayment scheme is like real commercial “debt” and will directly reduce the mortgage their child can take out to get started on the housing ladder. But mortgage lenders understand this it is not a debt like a credit card or a bank overdraft to be paid back regardless of income so instead they count the payments as a fixed out-going not a so-called debt.
The interest-rates were the most unpopular part of the system and they have been cut back.
It would be a tragedy if misunderstanding the current model put a single young person were put off from applying for university because they thought they had to pay up-front or faced some intolerable debt burden. We used to put a lot of effort to sending recent graduates to every school and college to explain how the system worked. The number of students from disadvantaged backgrounds getting to university has actually gone up since £9k fees were introduced.
More recently the system has had few defenders.
Conservative ministers preferred apprenticeships and were happy to feed anxieties about student debt in the hope this would drive more young people into apprenticeships instead.
A low point was Tory ministers saying they would not increase fees as it would add to the cost of living. But students don’t write a cheque to go to university. And even when fees go up provided there is no change in the repayment terms then graduates won’t pay more per year either. Nobody will pay any more any month as a result of an increase in fees.
A fee increase simply means that it takes a graduate longer to repay. So a prosperous graduate finds that they pay back until they are say, 48 not 44. Their older self will be able to look back knowing that their repayments in prosperous middle age helped ensure they had a better education as a younger person twenty years earlier.
There are real cost of living pressures on students but that is because Sajid Javid abolished means-tested maintenance grants and their maintenance loans do not cover their living costs. Many students get extra help from their parents and it is a dangerous barrier to social mobility if students from low income families struggle to make ends meet while at university. That is a real problem but separate from the graduate repayments of their loans.
Yesterday’s announcement was the minimum necessary to avoid a real financial crisis in higher education. The real debate is how much more universities need to offer a good service to their students and what can be expected from them in return.
The present system is unloved but essential for the funding of higher education and it works. We’ve got a system based on student choice, graduate repayment, and limited taxpayer funding. No superior alternative is available.
We ought to embrace it, explain it and get on with making it work as best we can.
