In 2012, the coalition government’s then Universities Minister, David Willetts, gave universities permission to triple tuition fees from £3,000 to £9,000 a year.
The government was keen to reassure young people that these much higher fees could be paid with “income-contingent” student loans, meaning that student debts built up while at university would not need to be paid back until after graduation when borrowers started to earn an income of more than £21,000.
What was not so broadly advertised was that high rates of interest on the loans would be charged each month while a student was at university, and for the next 30 years after graduation, while repayments comprising an extra 9% “graduate tax” in all but name would be taken from monthly pay packets on top of National Insurance contributions of 12% and Basic Rate Income Tax of 20%. A young graduate’s effective tax rate would be a whopping 41%, a far cry from the “posh coffee a day” rhetoric from government ministers. The government’s calming tones continued: the current terms and conditions would not change they said, and the threshold would rise in line with inflation.
Just two years later and using “secondary instruments” that did not need the prior approval of Parliament, the government reneged on their pledge, and froze the threshold at which repayment starts. This meant more low-earning graduates would be dragged into repayment more quickly.
In the summer of 2016, and breaking yet another pledge, the government replaced maintenance grants, given to the poorest students, with maintenance loans, meaning that students from poorer backgrounds would have to borrow even more money in order to be able to afford to live away from home. This will add tens of thousands of pounds more debt to the average loans of those from poorer families. Furthermore, the amount students are able to borrow in the form of a student loan is now based on parental income, so that some students may have to depend more than they would want on their families to help cover their living costs.
IF started to receive calls from worried parents, many of whom simply did not have enough money spare to help their children. Yet more parents contacted IF, desperately concerned about the huge amount of debt being placed on their children’s shoulders, and the subsequent stress felt by both parents and students.
IF responded by establishing a new campaign called Parents Against Student Debt (PASD), run by parents calling for a fairer student deal.
Since its launch on the autumn of 2016 we’ve been on the ITV Tonight Programme, on the BBC and in The Independent. We’ve put pressure on politicians and met with the NUS.
There is still much more to do, but we will continue to challenge: the use of monthly compound interest in rapidly driving up student debt; the use of the Retail Price Index (RPI) as a form of measuring inflation; and how the imposition of an additional 3% interest on top of RPI can be justified when the government can not only borrow at lower rates but also lends of other ages at much rates of interest.
Parents are waking up to the debt their former-graduate children face for 30 years and now for new students the terms have changed to 40 years, with the threshold of repayment now lowered to £25,000 from around £27,000. This means once again, that more lower-earning graduates will be pulled into repayment more quickly.
IF challenges both the principle of the failed experiment that was the marketisation of higher education and stands firm against the university lobby now calling for annual fees to rise by inflation with some Vice Chancellors calling for £12-13,000 fees per year.
We call for:
- A return to block grants for fees
- The removal of high interest rates
- Lowering the 9% repayment rate
- Increasing the threshold of repayment
- Reducing the 40-year loan terms imposed on new students
- Returning to maintenance grants for students from poorer households
- Increasing maintenance loans for all students
IF is working to help get students and graduates a fairer deal but we need your help.