9k fees policy costs more than it saves?

by Kirsty-Louise Hunt
News Editor

New government forecasts predict that the £9,000 a year tuition fees policy in England and Wales could end up costing the public purse more than it saves.

Responding to a parliamentary question from Labour’s shadow universities minister Liam Byrne on 20 March, Universities Minister David Willetts said:  “This Department has been reviewing our modelling of the RAB charge on student loans. We currently estimate the RAB charge on student loans to be around 45%, which reflects our current estimate of the costs to Government of the higher education subsidy to students.”

The new forecast estimates that 45% of students will be unable to repay their loans – up from an estimate of 40% just four months ago.

It is very close to the 48.6% figure which, if reached, experts predict the policy to cost more to the public purse than it saves.

In 2010, when Ministers decided to increase tuition fees to £9,000 a year they estimated that only 28% of student loans would not be repaid.

Students start to repay their loans when they earn over £21,000 a year and repayments are linked to earnings.

The announcement has led to fears that Universities will face further cuts to fill the gaps in the Department for Business, Innovation and Skills (BIS) budget.

The Office for Budget Responsibility (OBR), in its latest ‘Economic and fiscal outlook’ over a six year period from 2013-2018, forecast repayments will be £2.5 billion lower than in the OBR’s last report in December.

Andrew McGettigan, author of The Great University Gamble and who first highlighted the figures, wrote in his blog: “This may present difficulties for [the Department for Business Innovation and Skills’] budgets in the near term and certainly poses acute questions for any attempt to sell loans issued to those starting undergraduate study before 2012.”

Toni Pearce, NUS President, said:

“Forcing debt onto our students as a way of funding universities is an experiment that has failed our country.

“Last week’s revelations blew apart ministers’ claims that £9,000 fees would save public money, confirming our long held view that the current system was ideologically driven and cost more than what it replaced.

“The current model of university tuition fees funding higher education is neither fair nor sustainable. It has been discredited.”

Students in England and Wales currently pay up to £9,000 per year for their University course. Scottish students, under the current policy of the Scottish Government, do not pay tuition fees. This is also true for EU students who study at Scottish Universities – but students from England, Wales and Northern Ireland who choose to study in Scotland are charged the same level of fees they face elsewhere in the UK.

The Scottish Government  maintain that a post-independent Scotland run by the SNP would maintain this policy, despite recent challenges that this would be illegal under EU law.

At the UK level, Labour recently waded into the debate on tuition fees policy by indicating they may pledge to cut fees from £9,000 to £6,000 per year in their 2015 election manifesto.

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