David Willetts: Is there a better way to pay for higher education?
This is performative politics again.
David Willetts was Minister for Universities and Science 2010-2014 and is a member of the House of Lords.
Many areas of British public policy are subject to wild oscillations and turbulence. Funding higher education is much more stable. For the past twenty years all three political parties, faced with difficult decisions about how to pay for it, have opted for broadly the same model. But as we are seeing again now that does not mean the system is accepted let alone actually welcomed.
Is there a better way?
Graduates do earn more on average than non-graduates. So it is reasonable to expect them to pay back for the cost of their higher education. The repayments, at the rate of 9 per cent, depend on your income and only start above a threshold which for many graduates now stands at £28,470. The Institute for Fiscal Studies has some useful illustrations of what that means.
“Someone earning £35,000 a year pays back £49 per month, 1.6 per cent of their gross earnings. This rises to £161 a month (3.9 per cent) for someone earning £50,000 and £311 a month (5.3 per cent) for someone earning £70,000.”
My focus as minister for universities was to try to hold down the monthly payments which is why we increased the repayment threshold to £21,000 from the level we inherited from Labour. But we were also expecting people to pay back more in total during their working lives.
The burden of graduate “debt” is now a highly charged political issue.
The volume of the debt is a genuine source of concern to many graduates, even though it is not like a commercial loan or a mortgage. (Indeed because it is not a commercial debt with an obligation to pay back whatever your circumstances mortgage lenders look not at the debt but at the repayment as part of fixed out-goings.)
However the debt has turned out much higher than we planned fifteen years ago because of the subsequent decision in 2016 to convert all maintenance grants into loans, adding to the debt. There were also concerns that people needed help on masters courses so loans were extended to them. There was then the burst of high inflation which put up the debt as well especially for graduates earning over about £52,000 for whom there is an interest rate of RPI plus 3 per cent.
The interest rate has always been the issue which arises most unhappiness.
The last big review of higher education funding by Philip Augar proposed there should be a cap of 120 per cent on the total amount of debt. That should now be implemented. There are other attractive proposals as well. Uprating the amount due by CPI not RPI. After setting the higher repayment threshold the Coalition also said it should increase with earnings and that pledge has not always been honoured – indeed it is the latest freeze to the threshold which has …
This is performative politics again.
David Willetts was Minister for Universities and Science 2010-2014 and is a member of the House of Lords.
Many areas of British public policy are subject to wild oscillations and turbulence. Funding higher education is much more stable. For the past twenty years all three political parties, faced with difficult decisions about how to pay for it, have opted for broadly the same model. But as we are seeing again now that does not mean the system is accepted let alone actually welcomed.
Is there a better way?
Graduates do earn more on average than non-graduates. So it is reasonable to expect them to pay back for the cost of their higher education. The repayments, at the rate of 9 per cent, depend on your income and only start above a threshold which for many graduates now stands at £28,470. The Institute for Fiscal Studies has some useful illustrations of what that means.
“Someone earning £35,000 a year pays back £49 per month, 1.6 per cent of their gross earnings. This rises to £161 a month (3.9 per cent) for someone earning £50,000 and £311 a month (5.3 per cent) for someone earning £70,000.”
My focus as minister for universities was to try to hold down the monthly payments which is why we increased the repayment threshold to £21,000 from the level we inherited from Labour. But we were also expecting people to pay back more in total during their working lives.
The burden of graduate “debt” is now a highly charged political issue.
The volume of the debt is a genuine source of concern to many graduates, even though it is not like a commercial loan or a mortgage. (Indeed because it is not a commercial debt with an obligation to pay back whatever your circumstances mortgage lenders look not at the debt but at the repayment as part of fixed out-goings.)
However the debt has turned out much higher than we planned fifteen years ago because of the subsequent decision in 2016 to convert all maintenance grants into loans, adding to the debt. There were also concerns that people needed help on masters courses so loans were extended to them. There was then the burst of high inflation which put up the debt as well especially for graduates earning over about £52,000 for whom there is an interest rate of RPI plus 3 per cent.
The interest rate has always been the issue which arises most unhappiness.
The last big review of higher education funding by Philip Augar proposed there should be a cap of 120 per cent on the total amount of debt. That should now be implemented. There are other attractive proposals as well. Uprating the amount due by CPI not RPI. After setting the higher repayment threshold the Coalition also said it should increase with earnings and that pledge has not always been honoured – indeed it is the latest freeze to the threshold which has …
David Willetts: Is there a better way to pay for higher education?
This is performative politics again.
David Willetts was Minister for Universities and Science 2010-2014 and is a member of the House of Lords.
Many areas of British public policy are subject to wild oscillations and turbulence. Funding higher education is much more stable. For the past twenty years all three political parties, faced with difficult decisions about how to pay for it, have opted for broadly the same model. But as we are seeing again now that does not mean the system is accepted let alone actually welcomed.
Is there a better way?
Graduates do earn more on average than non-graduates. So it is reasonable to expect them to pay back for the cost of their higher education. The repayments, at the rate of 9 per cent, depend on your income and only start above a threshold which for many graduates now stands at £28,470. The Institute for Fiscal Studies has some useful illustrations of what that means.
“Someone earning £35,000 a year pays back £49 per month, 1.6 per cent of their gross earnings. This rises to £161 a month (3.9 per cent) for someone earning £50,000 and £311 a month (5.3 per cent) for someone earning £70,000.”
My focus as minister for universities was to try to hold down the monthly payments which is why we increased the repayment threshold to £21,000 from the level we inherited from Labour. But we were also expecting people to pay back more in total during their working lives.
The burden of graduate “debt” is now a highly charged political issue.
The volume of the debt is a genuine source of concern to many graduates, even though it is not like a commercial loan or a mortgage. (Indeed because it is not a commercial debt with an obligation to pay back whatever your circumstances mortgage lenders look not at the debt but at the repayment as part of fixed out-goings.)
However the debt has turned out much higher than we planned fifteen years ago because of the subsequent decision in 2016 to convert all maintenance grants into loans, adding to the debt. There were also concerns that people needed help on masters courses so loans were extended to them. There was then the burst of high inflation which put up the debt as well especially for graduates earning over about £52,000 for whom there is an interest rate of RPI plus 3 per cent.
The interest rate has always been the issue which arises most unhappiness.
The last big review of higher education funding by Philip Augar proposed there should be a cap of 120 per cent on the total amount of debt. That should now be implemented. There are other attractive proposals as well. Uprating the amount due by CPI not RPI. After setting the higher repayment threshold the Coalition also said it should increase with earnings and that pledge has not always been honoured – indeed it is the latest freeze to the threshold which has …
