The politics of an entire generation have calcified around the issue of tuition fees, with the protests that took place outside Parliament in the autumn of 2010 representing the perceived generational injustice that Millennials have suffered at the hands of their elders. Heads have rolled, mostly Nick Clegg’s and the issue has become a cause-célèbre, adopted by politicians who want to win over the youth vote. The very unsexy truth, however, is that nobody really knows what to do about student debt.
Last night the Conservative government suffered a very embarrassing defeat in the House of Commons after their government-forming allies, The DUP, voted alongside Labour in favour of an opposition motion to stop them raising tuition fees by another £250, making the maximum that any university could charge £250.
Introducing the motion, Shadow Education Secretary Angela Rayner said ‘we wouldn’t even be having this debate today if the Labour Party had won the general election because we would have abolished tuition fees as promised.’
She then went on to say ‘the party opposite have already trebled tuition fees in 2010 to £9,000 a year and that is what we are debating here today…they have already imposed interest rates of 6.1% and frozen the repayment threshold at £21,000 a year despite Conservative ministers in the Coalition government promising that it would rise in line with earnings.’
The vote came at a bad time for the Conservatives who have reportedly been looking at ways to tackle tuition fees and student debt in an attempt to curry favour with the much-courted millennial generation. Last weekend several papers revealed that Theresa May’s government had been looking to cut the English and Welsh student loan interest rate.
As things stand, the interest rate is 6.1% if you went to university in 2012, that’s RPI (the Retail Price Index) plus 3%. As politicians on all sides try to work out how to make things better for young people and, let’s not forget, most importantly, win their votes, what’s quickly becoming clear is that they don’ really know how to solve the problem.
On the one hand, scrapping tuition fees altogether sounds appealing, and the idea of free education for anyone who seeks it is noble, but we do need our universities to be properly funded? University should be affordable but the money to keep them running is going to have to come from somewhere.
On the other, student debt has risen to £12.6bn in this country. It was up by 17 per cent to £86.2bn in total last year as the first group of graduates who paid the higher fees of £9,000 left university and entered the world of work. It is currently thought by the Institute for Fiscal Studies that two-thirds of UK students will never, that’s right – never, pay off their debt. So, clearly, we have a problem.
The Chancellor, Philip Hammond, has suggested that going forward universities might be forced to link their fees to the actual cost of courses. He made it clear that the government is ‘looking carefully’ at the issue and it’s thought that they think Corbyn’s proposals to scrap fees altogether led to a surge in support for Labour.
One of the proposals he is thought to be considering is cutting the interest rate. Once again, this sounds appealing but it won’t actually help those who need some respite the most. As things stand, the more you earn, the more you pay back. This is actually a very progressive system which sees higher earning graduates paying back the most while those on lower salaries face lower repayments every month.
As Martin Lewis, the Money Saving Expert points out ‘what you borrow and the interest rate has no impact on annual repayments. Instead, all it changes is whether or not you’d clear the loan plus interest within the 30 years’ before it gets cut off. In essence, cutting the interest rate won’t put more cash in the pockets of graduates who face low paying work at the start of their career and high housing costs.
As Lewis sees it, it’s the repayment threshold we should all be concerned about. This was frozen last year because graduates aren’t earning as much as politicians would like, keeping it low ensured more people were making repayments. It was supposed to rise in line with average earnings when the fees were raised way back in 2010.
We need to start thinking of tuition fees and student debt as a tax, not a loan. That way we might be able to find a solution that will actually benefit graduates and put more cash in their bank accounts when they’re starting out after education.
As Lewis puts it: ‘the problem here is one of psychology. The interest rate seems scary so we hear large cries – even though in practice it doesn’t affect most. Freezing the repayment threshold is complex so we hear little – but it affects millions. Reversing that is a far greater priority…’
‘Repayment threshold’ definitely isn’t the most exciting thing you’re going to hear in the debate about tuition fees and it doesn't sound as good as cutting interest or, indeed, scrapping the things all together. But, when it comes to courting the youth vote we should all be very wary of seemingly simple solutions to complex problems.
You might also be interested in:
Follow Vicky on Twitter @Victoria_Spratt
This article originally appeared on The Debrief.