Sutton Trust - IFS report on student loans system

10 April 2014

Commenting on a report into the student loans system by the Sutton Trust and Institute for Fiscal Studies, Dr Wendy Piatt, Director General of the Russell Group, said:

“Good teaching needs proper funding to be sustainable. Given the tremendous benefits most graduates gain from their degrees it is fair for them, as well as the taxpayer, to contribute towards the cost, when they can afford to do so.

“It is the terms and conditions of repayment under the new student loan system, not projected lifetime earnings, which means graduates now pay back a much lower amount each month, and so take longer to repay their loans than under the previous system. Graduates will now pay only 9% of their annual earnings above £21,000 – a far higher threshold than the £15,000 previously, which means loans may be repaid less quickly. These repayment conditions can, of course, be changed by the Government to increase the amount of money repaid.

“Moreover, this report is based on predictions about the economy and the workforce for the next thirty years – only time will tell if these models will be borne out by reality.

“The report also assumes that everyone takes the maximum loan they are entitled to and repays it only at the minimum required for the full 30 years. However, graduates do have the option of repaying their loan more quickly if they can afford to do so, unlike under a graduate tax system. It’s important to put in context the size of repayments: for a graduate earning the UK average annual salary of £26,500, they would pay over £5,500 in income tax and national insurance contributions but only £495 in student loan repayments.

“There is no evidence to suggest higher fees have put off students from going to university. In fact, the number of students on free school meals being admitted to the ‘higher tariff’ universities rose by 22% last year.

“In 2014-15 the 20 Russell Group universities in England will be spending £193.3 million on scholarships, fee waivers and bursaries aimed at the least advantaged students. More than a third of students at our universities received a bursary or scholarship worth on average £1400 in 2011/12.

“We are not clear how the Sutton Trust’s recommendation that tuition fee loans be means-tested would benefit poorer students.

“Graduates face a competitive jobs market, but a degree from a Russell Group university remains a valuable investment. A Government-commissioned study has shown male graduates from Russell Group universities earn 16% more over the course of their lifetime than male graduates from newer universities.”

Notes to Editors

1. It is estimated that female graduates earn £252,000 more over the course of their lifetime than women without degrees. Male graduates earn on average £168,000 more over the course of their lifetime than men without degrees. Source
2. Repayment amounts based on 2014/15 financial year tax rates and allowances.
3. All the Russell Group universities are included in the UCAS-defined list of higher tariff institutions. The percentage of students from disadvantaged backgrounds being admitted to higher tariff universities has gone up by 11% and the percentage eligible for Free School Meals being admitted to higher tariff universities has gone up by 22%. There have also been increases in the percentages of students being admitted from all minority ethnic backgrounds. Source
4. A Government-commissioned study has shown male graduates from Russell Group universities earn 16% more over the course of their lifetime than male graduates from newer universities. Female Russell Group graduates earn 9% more over the course of their lifetime than female graduates from newer universities. Source