Poorest students saddled with £50,000 debt under new student finance plans
Chancellor George Osborne unveiled a new maintenance loan for poorer students of up to £8,200 (US$12,750) each year, which will replace the £3,500 grant which is currently given to students to pay rent and living costs.
The new loan would mean 40 percent of British students would graduate with £53,000 of debt from a three year course. This is a rise of over £10,000 from the estimated £40,000 of debt faced by students under the current system.
A second tuition fee reform will also see the threshold for the payback of student loans frozen at £21,000. This could mean that students are forced to pay an extra £3,800 on average per student, analysis from the Institute of Fiscal Studies (IFS) shows.
The IFS further calculated the government could gain an extra £2 billion per year as a result of the reforms.
As well as saving the government £1.4 billion each year, the new scheme will mean that on average, students earning middle incomes will pay on average £6,000 more per year for the duration of the pay-back period.
“While the small increase in support for living costs available to students from lower-income families will undoubtedly be welcomed by many, the switch from maintenance grants to maintenance loans will result in substantially higher debt for the poorest students,” IFS research economist Jack Britton said.
“For most, though, it is the freezing of the repayment threshold which will do more to raise loan repayments, and hence increase the cost of higher education,” Britton added.
He said the previous reforms had not necessarily had a “negative effect” on students, but added only “time would tell” if the new measures would be successful.
“The 2012 reforms appear not to have had a negative effect on higher education participation amongst full-time students from poorer backgrounds. This likely reflected the fact that the system was designed to protect both that group and those with low expected lifetime earnings. Only time will tell whether these new changes will be similarly benign in their effect.”