Much has been made of Lord Browne’s findings in the most comprehensive review of the University system in the UK. Amongst his findings, Lord Browne proposed the lifting of the student fees cap, which will enable universities to set their own student tuition fees. At present there is a cap of £3,225 per annum and Lord Browne believes having a cap of any sort hampers Universities seeking to raise extra funds.
The National Union of Students had preferred a Graduate Tax model, which meant that students would have paid back the loan, depending on their income. Fees would be paid after they completed the studies and it also meant that higher earners would contribute more than say someone on a lower salary. Under Lord Browne’s proposal, no student would need to pay the tuition fee upfront and instead, begin to repay fees until the graduate’s salary reaches £21,000.
What does this mean for students? It now means that many students will start seeing tuition fees increase from the current £3,225 per annum. Those students attending prestigious universities like Oxford and Cambridge face even higher fees, potentially preventing students from less wealthy backgrounds from being put off in applying to the top Universities in the UK. In this instance, the fear is the student being laden with even high levels of student loans upon graduation.
Universities, on the other hand, argue that increasing student tuition fees gives them greater autonomy to set fees based on its own individual university financing needs. For example, the need for Oxford University to raise fees to provide student services and best academics may be very different to a smaller university with lesser number of students.
Student Debt
At present, it is estimated that, on average, a student owes nearly £16,000 upon leaving university, according to Push. Push conducted a survey of 2000 students at 139 universities in the UK and concluded that student debt has increased on average by 5.4% to nearly £5,600 per year. However, the figure is likely to rise exponentially once the cap on tuition fees is removed. Lifting the cap on student tuition fees could mean that many students could leave university with an academic degree costing them £25k in 2010.
Student Loans
At present the Student Loan Company (SLC) administers the student loan processing in England and Wale. In the academic year 2009/10, the SLC made a provisional amount of support (as of November 2009) of £6238m to English domiciled students studying in the UK and EU students studying in England. Through the Student Loans Company, students can obtain financial assistance through loans depending on their circumstances, where the student lives and on the type of courses undertaken at University.
The loans are means tested and loan repayments begin when the student leaves university and starts earning more than £15,000 per annum. Payments take place in installments which include interest through a system called Income-Contingent Repayment (ICR).
Under the new system, the graduate would pay the money back once earnings have reached £21,000, and interest is charged at the cost of borrowing from the government (currently at 2.2% plus inflation). Interestingly, student loans will be written off after 30 years rather than the 25 years under the present system. Furthermore, under the new system, maintenance loans will not be means tested and instead, all students can apply for a flat maintenance loan of £3,750 per annum.
Private Loans
There is an increased chance of students taking out private loans from authorised and unauthorised lenders in the UK to cover the cost of their education if they are unable to raise enough money from SLC. However, the danger here for a student is to get into more debt than s/he can manage, thus it is imperative s/he seeks advice at the earliest opportunity so as to make informed financial decisions.
Many universities will provide students with further information and links to organisations providing financial advice. Such services enable the student to seek advice at the earliest opportunities enabling him/her to seek the most suitable advice without getting into financial straits.
Changes Ahead
Lord Browne’s long awaited review of higher education in England and Wales has spelled out sweeping changes to funding. One of the notable changes has been lifting the cap on student fees. For many, this signals an era of a two tiered educational system like the American model. Under this model, students from wealthy backgrounds enjoy a prestigious education, whilst students from disadvantaged backgrounds attending lesser known universities, thus impacting employment prospects upon graduation.
Under the new system, Lord Browne also proposed to abolish the four present bodies including Higher Education Funding Council for England, Quality Assurance Agency, Office for Fair Access, and the Office of the Independent Adjudicator to be replaced by a single Higher Education Council. The new body would have greater powers to ensure fairness and accessibility to higher education. Time will tell what impact these sweeping changes have upon the educational system in the UK.
Readers may be interested in reading the winners and losers of a graduate tax system in the UK.
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