New debt warning for Wales’ students
STUDENTS from Wales starting university for the first time next month will have less cash in hand and higher debts than before, a new report has claimed.
The Welsh Government’s new finance package, which is supported by the NUS Cymru, is not widely understood, according to UK think tank the Higher Education Policy Institute (HEPI).
Under the new package, student debt will soar by 20% to 85% depending on a student’s background; there’s a £500 cut to cash-in-hand support for the poorest students; and parents are no longer expected to contribute towards maintenance support.
Full-time tuition fee loans for undergraduates from Wales are rising to £9,000, just under the current English maximum of £9,250.
HEPI says: “This is roughly double the previous amount typically borrowed by students from Wales for their fees, as they were previously entitled to a fee grant worth around £5,000 which reduced their tuition fee and loan to around £4,400.”
Under the old system, students got different levels of total maintenance support depending on their
Students from households with incomes of less than around £18,000 were entitled to a £4,300 loan and a £5,200 grant, totalling £9,500.
Students from richer backgrounds were not entitled to a grant but were entitled to a loan worth £6,900 where household income was around £50,000, falling to a flat-rate £5,200 if household income was above £60,000.
From 2018-19, all full-time, first-time undergraduate students will have an entitlement to maintenance support from loans and grants amounting to £9,000 a year, irrespective of household income – £500 less than last year.
All full-time students from Wales will be entitled to a (nonrepayable) maintenance grant of £1,000. The balance between loans and grants depends on household income.
“Now, students from the richest families are expected to borrow around nine times more than students from the poorest households to cover their living costs,” Nick Hillman, director of HEPI and author of the report says.
From September, over a threeyear course, those from the lowest-income households can expect about £30,000 of debt, made up of £27,000 for fees and just under £3,000 for maintenance, excluding interest.
Those from the highestincome households can expect £51,000 of debt, made up of £27,000 for fees and £24,000 for maintenance, excluding interest.
The HEPI says: “In other words, under the new system everyone will owe more than now. But the increase in debt is much more substantial for those from better-off households.
“Graduates from the poorest households will see their debts rise by just under 20%, from around £25,000 to around £30,000 (excluding interest) over an entire three-year degree programme.
“Graduates from households with £50,000 annual income will see their debts rise by around 40%, from £33,000 to £46,000 and graduates from households with £60,000 annual income will see their debts rise by a massive 85% from £28,000 to £51,000.
“Those from better-off backgrounds will owe much more than graduates from poorer households and much more than they do now, assuming they make full use of their loan entitlement.”
The maximum total loan of £51,000 for a three-year degree is – progressively – reserved for those from the richest households and is slightly lower than the maximum loan in England of £54,000 which – regressively – is incurred by those from the lowest-income households. When parents don’t contribute the sums expected, students from relatively well-off households can end up with less cash in hand than those from poorer households who are entitled to more government-backed support.
“Giving everyone the same total maintenance support, as is happening in Wales, does not entirely solve such problems,” HEPI warns.
“The sort of people your parents are and their attitudes towards supporting their (adult) children is still likely to determine how much students borrow.
“Put simply, some middleclass students will feel obliged to borrow the maximum loan entitlement to live and others will not because their parents will subsidise them directly, leaving students from similar backgrounds with very different levels of debt.”
The clearest winners from the new package could be parents, who are no longer under the same expectation to contribute, claims HEPI: “This could be said to fly in the face of widespread concerns about inter-generational fairness and the need to do more to support young people using resources accrued by older generations.”
A Welsh Government spokesman said: “We welcome Nick Hillman’s recognition that Wales has a financial package that will help many students and ensure well-funded universities.
“All the research shows – and this has been widely endorsed by the NUS and experts from across higher education – that it is upfront living costs that discourage students from accessing higher education, particularly those from poorer backgrounds.
“That is why we have the most generous system of support in the UK – a system that is designed to ensure that all eligible students are able to access a minimum level of support, regardless of household income.
“Our ‘whole-system approach’ also means that Wales will be the only country in Europe to provide equivalent maintenance support – in grants and loans – to part- and full-time undergraduates and postgraduates.
“What this research does not take into account is that no student actually has to take out a loan; a student from a household below £18,000, for example, could just take out an £8,100 grant.
“It’s also important to point out that any full-time undergraduate student from Wales taking out a maintenance loan has access to a partial cancellation of their loan when they enter repayment – this can be worth up to £1,500.”
A spokesman clarified the statement “no student actually has to take out a loan”.
“By that, we meant that the additional loan is optional, eg a student may prefer to supplement their grant with a part-time job or parents may be able to help – we don’t expect them to but they may want to,” he said.
The NUS Cymru was involved in the review of student finance in Wales.
A spokesman said: “The new student finance arrangements mean that more students will have more money in their pockets while they’re studying.
“The new arrangements also include much-needed support for part-time and postgraduate students, which we welcome.
“That said, we remain in favour of taking progressive steps towards a fee-free education.
“The new student finance arrangements represent a step in that direction because they remove a lot of up-front pressure on students, which causes a significant strain on mental health and on the ability of students from less well-off households to get in and get on in education.”
Students from the richest families are expected to borrow nine times more than students from the poorest households REPORT AUTHOR NICK HILLMAN