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Augar Review consultation will seek to ‘overhaul’ university funding

Philip Augar
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Ministers to overhaul university funding after long consultation.

Kate Green MP 100x100Kate Green MP, Labour’s Shadow Education Secretary, responding to reports that the Augar Review consultation will seek to ‘overhaul’ university funding, said:

“Over two years since the Augar Review was published the Government has not even launched its consultation.

“While Ministers squabble amongst themselves about the changes needed, students from underrepresented backgrounds continue to miss out and others are leaving university with soaring debt.

“Destabilising university funding, cutting courses or capping numbers will deny students the brilliant education and experience our world-class institutions have to offer. Denying young people opportunities must not be the legacy of this Government’s approach.”


No easy answers: English student finance and the spending review 

10th Jun 2021: Reducing the student loan repayment threshold to under £20,000 would save £3.8 billion and lower student loan write-off costs in England from over one-half (54%) to one-third (33%). 

Although cuts to any form of education may be regarded as counter-productive in a period of upheaval, it has been widely reported that the Government are looking to make savings from public expenditure on higher education in England at the forthcoming spending review.

The Higher Education Policy Institute is therefore publishing some new modelling commissioned from London Economics on various changes to student loans that have been proposed.

The results are being published as No easy answers: English student finance and the spending review (HEPI Policy Note 31). This considers some alternative parameters for English student loans, including:

  1. removing real interest rates;
  2. an increase in the repayment period from 30 years to 35 years; and
  3. reducing the repayment threshold to a little under £20,000.

The first of these options would increase the cost to Government while the other two would reduce it.

Nick Hillman, the Director of the Higher Education Policy Institute and the author of the paper, said:

‘It makes little sense to spend less on education during a time of crisis. There are strong arguments, for example, to spend more on higher education when the labour market is changing so fast, when the number of 18-year olds is growing and when the amount that institutions receive to educate each student has been eroded by inflation.

‘If, however, policymakers have higher education in their sights for the spending review, then some ways to save money will be more damaging than others. The main options are reducing student places, spending less on each student or recouping more money from graduates by changing the terms of student loans. Cutting places at a time of rising demand is particularly unwise, as is giving institutions less for teaching when their finances are already so squeezed.

‘Our modelling shows some of the changes to loans that might be made instead. For example, it is possible to reduce the write-off costs by reducing the repayment threshold or extending the repayment period. Such tweaks might not be popular but they could deliver savings if politicians are determined to find them. Reducing the repayment threshold to under £20,000 raises so much it might even enable new initiatives, such as the return of maintenance grants, alongside saving money.

‘Different changes have different impacts on different groups and we urge policymakers who want to save money by tweaking student loans to use the next few months wisely to ensure the impact is as fair as possible.’

 

Current system

No interest above inflation

35-year repayment term

Threshold of £19,390

Cost of fee loans

£5.4 billion

£6.1 billion

£4.9 billion

£3.2 billion

Cost of maintenance loans

£4.0 billion

£4.5 billion

£3.7 billion

£2.4 billion

RAB charge

54%

61%

50%

33%

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Percentage not repaying all

88%

74%

85%

76%

Percentage not repaying any

33%

33%

33%

16%

Average debt

£47,000

£45,600

£47,000

£47,000

Average repayments male

£34,800

£28,400

£37,900

£44,700

Averae repayments female

£13,100

£11,800

£15,500

£23,500

The total cost of English-domiciled undergraduates starting their studies in 2020/21 (plus EU students in England) is set to be around £11 billion: £5.4 billion on tuition fee loan write-offs; £4.0 billion on maintenance loan write-offs; and £1.2 billion on the residual teaching grant (paid by the Office for Students to institutions). The average debt on graduation is expected to be £47,000 and the proportion of loans written-off (the so-called RAB charge) is likely to be 54%. Around 88% of former students are expected not to repay their full loan. Male former students are set to repay around £35,000 on average and female former students around £13,000.

1. Abolishing the real rate of interest

This is thought by some policymakers to be a particularly unpopular feature of the current system, would have an annual cost of £1.2 billion and increase the RAB charge by seven percentage points to 61%. The impact would be regressive, helping only the best-paid graduates because others do not come close to extinguishing their loan, irrespective of interest, before the 30-year cut off. The repayments of men would fall on average by £6,400 but the repayments of women would fall by £1,300, reflecting the graduate gender pay gap.

2. Extending the repayment period from 30 years to 35 years

This would save the government / taxpayers just under £1 billion and reduce the RAB charge by four percentage points to 50%. It would have no impact on graduates with the lowest incomes, who would continue to repay nothing, nor graduates with the highest incomes, who would continue to pay off their full loan before the original 30 years were over. However, it would affect others. The Augar report recommended an even longer 10-year increase in the repayment term, as ‘we believe borrowers should continue to repay their loan for as long as they benefit; we judge this to be 40 years after study has ended.’

3. Reducing the repayment threshold to match the repayment threshold for pre-2012 student loans 

Reducing the repayment threshold to £19,390 (from £26,575) would reduce the cost of one cohort of students by almost £3.8 billion, split by £2.2 billion less on tuition fee loan write offs and £1.6 billion less on maintenance loan write offs. People who studied under the old loan system, before £9,000 fees and loans were introduced, faced a lower repayment threshold in 2020/21 of £19,390. If this repayment threshold were extended to those who currently face the higher threshold, then the loan write-off would fall from 54% to 33%, which is roughly the expected rate when the current system was introduced. It would also reduce the proportion of former students who do not repay their entire loan from around nine-in-ten (88%) to three-quarters (76%) and halve the proportion who never repay a penny (from 33% to 16%). On average, both male and female graduates would repay around £10,000 more. It has been claimed the decision to increase the repayment threshold to its current level was poor value for money. The Augar report said: ‘We question the justification for a system which excludes so much of a borrower’s earnings from any repayment and which helps to reinforce the “no win, no pay” element in student choice.’


Student Academic Experience Survey 2021: Students’ views on the future of online learning 

The HEPI / Advance HE Student Academic Experience Survey provides the most comprehensive data on the academic experience of full-time undergraduates in UK institutions, providing each year new data on what students think on a whole range of issues surrounding their experience of higher education.

It has become a firm feature of the higher education policy landscape, featuring regularly in ministerial speeches because it reaches into places other surveys do not go. 

As the Survey was conducted between February and March 2021, this year’s results demonstrate the impact that the Coronavirus pandemic has had on students’ higher education experience, including an assessment of a year being taught remotely and largely away from campus and how the challenges faced by the sector during the pandemic have impacted students.

As well as the standard questions on value-for-money, contact hours, who should pay for higher education and well-being, this year’s Survey has new questions on: 

  • Students’ views on the future of online learning
  • Whether students’ have considered withdrawing from university
  • Students’ expectations of their early career 
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