Why I don’t care about my student debt
The inadequacy of loans compared to living costs is the real issue putting poor teenagers off university
So there you have it. Three quarters of graduates will never pay off their student debt, and the poorest will be worst off. What a disaster. Perhaps youngsters were right to vote for Jeremy Corbyn. Not quite, because the headlines around the Institute for Fiscal Studies’ report into the vast sums owed by today’s graduates rather miss the point.
The idea that student debt is crippling young people is bogus. I was in the first cohort to pay £9,000 fees. A few weeks ago, I finally logged onto the student finance website, more than 18 months after graduating, to see how much I owed. It didn’t take me so long to do so because I was scared. I was just disinterested. I had been under no obligation to pay any of it back during that period, having had no income.
It turned out to be quite a scary number, large enough to lead to a life of misery. Then, having looked at my single digit repayment that month, I closed the website and haven’t thought about it again until now. I, too, seem unlikely to ever pay off my loans, and it doesn’t really matter.
This is because the debt created by student loans isn’t like other debt. You only pay it back on earnings above £21,000 at a rate of nine per cent. It doesn’t impact your credit rating, it is taken care of by your employer, and you can’t default on it. After 30 years, any remaining balance is written off.
In short, no one is starving or homeless, or living in a broom cupboard subsisting on instant noodles because of debts they owe to the Student Loan Company.
In that light, because only the best-paid graduates will pay the full amount back, Corbyn’s offer to wipe out student debt and scrap fees should be seen for exactly what it is: a huge cash transfer from ordinary taxpayers to the well-educated elite.
In Scotland, where there are no tuition fees for Scottish students, the cost has been borne by further-education colleges and schools – hardly egalitarian. For that is the other, more serious debate that needs to be had over fees: the question of social mobility.
Despite the introduction of higher fees, the number students from poorer backgrounds has continued to rise, as it has done in every academic year since 2005/6. The money gained from those who go on to be wealthy and clear their debts subsidises poorer students just entering university.
In 2015, almost a third of fees over £6,000 were used to help poorer students. And the statistics show it to be a success. In 2015, English students from disadvantaged backgrounds were 72 per cent more likely to apply compared with 2006. .
Yes, those from poorer homes are still less likely to go to university than richer students. Middle-class parents and schools not only create the expectation of a university education, but they pass on the knowledge for how to get one. Nevertheless, money is still a big issue when it comes to putting poor kids off university. Not because of tuition fees themselves, however, but rather misinformation and a lack of maintenance funds.
The first part of this would be easily resolved if politicians stopped telling young people that going to university will burden them with a lifetime of debt. What really matters, though, is living costs. Even at the maximum London allowance for the most disadvantaged, students with maintenance loans must live on just 82 per cent of the minimum wage.
Last year, when all grants were replaced with loans, Vince Cable was asked about student debt by The Independent. He said that he wasn’t opposed to loans over grants, but that students should be able to access “a significantly larger sum … The fact that it’s at such a low level is a deterrent to people from low-income families”. So there you go. A Lib Dem arguing that, far from abolishing loans, the Government should make them bigger.
On the whole, our current system works. Fundamentally, it is not the disadvantaged teenagers who pay, but the well-paid and successful graduates they become. What matters is bridging that gap, allowing those bright young things to survive until they become successful young things. To do that they need to borrow, and from the Government, not the bank. If the Tories really want to bridge the intergenerational divide, they should propose a triple-lock on the amount you can borrow in maintenance loans.