Thursday, 16 December 2010

Tuition Fees

The last few weeks have seen a lot of strong reactions nationwide on the issue of the raising of tuition fees and what the new system will do to levels of enrolment, social mobility, the arts and whether this will benefit or harm the country and the economy, both in the short term and the long term.

Firstly I would just like to give a brief overview of the old system and the new one. Under the old system, students paid tuition fees of £3,225 or thereabouts depending on the specific university and course, in England, Northern Ireland and non-Welsh students studying in Wales. Welsh students only had to pay £1,285 per year and Scottish students got free university tuition.

 Students could pay the fees upfront if they wished or they could get a student loan (from the Student Loans Company) with an interest rate of 4.4%. Repayments were at least 9% of your annual income over a threshold of £15,000. So, if you earned a salary of £22,000 the first year after university, you would have paid at least 9% of £7,000 = £630 as a repayment for that year. If you still had the loan outstanding after 25 years then the remainder was written off.

Under the new system, there will be a cap of £9,000 a year. This means that fees won't necessarily rise to £9,000 however, it seems likely that a large number of the top universities intend to do so and many more might as well. The government has said that any university charging more than £6,000 a year will have to take extra measures to provide access to students from poorer backgrounds. What this means is that virtually all universities will likely raise fees to £6,000 a year while some of the more prestigious will raise them further still.

These fees will only apply in England as education is a devolved issue for Wales, Scotland and Northern Ireland although all 3 have said that in light of these changes they might also raise their fees but this is by no means certain. Unlike the old system, no students will have to pay their fees upfront (part-time students did under the old system) and repayments will be a fixed 9% of your salary above £21,000 per year. Interest will be charged at the rate of inflation (Retail Prices Index) + up to an extra 3% for higher salaries. Any debt outstanding after 30 years will be written off.

So, should students be applauding or, as they have been, hurling abuse at the changes?

Obviously, the size of student debt is going to be far more substantial with debt for a 3-year course likely to top £40,000 (including living costs). This is irrelevant. Very few students ever paid back their loans fully under the old system before they were written off so the increase in debt will only affect those on the highest salaries (who I think we can all agree don't need to worry about paying back their debts anyway). Under the new system you would have to earn an average salary of £45,000 a year for 30 years to pay off your debt (which would mean you were earning more than 90% of the population) so for the vast majority of students the question will be, will I pay less over 30 years than I would have under the old system? The answer is surprisingly straightforward. If your average salary is less than £35,000 you pay less in total under the new system and if you earn more you will pay more.This is because the threshold has been raised to £21,000 rather than the old £15,000 so your yearly repayments are lower. 

DO NOT WORRY ABOUT THE SIZE OF YOUR DEBT BECAUSE THIS DEBT IS NOT DEBT. IT IS EFFECTIVELY A GRADUATE TAX. All your student debt will mean is that you'll pay from 0-5% of your total salary as contributions for 30 years after leaving university and it will then be written off.

The new system, despite how it has been maligned in the press, is actually rather progressive. This is because it means that how much you pay for your degree is based entirely on how much you earn after university rather than how much money you or your parents had before university. In other words, even if you were dirt poor, you could take out a student loan, get a degree and not worry because if you could only get a minimum wage job, you'd pay nothing for your degree, if you got a well-paid job, great,  you'd pay an extra 3-5% in tax but you'd have a decent job and a decent salary and if you got a very well-paid job yes, you'd pay 6-7% in tax but you'd still have a great salary and a far better standard of living than when you were growing up. So, if you're a poor student you can go to university safe in the knowledge that you would only pay for your degree if you could afford to and, even better, those who get the highest salaries will be the ones who pay the most for their degrees, almost certainly the fairest way of implementing any tax. For those who still think the new system is unfair, I would just like to point out that 30% of students will pay less for their degrees under the new system and these will be the ones with the lowest salaries after university, I think it is hard to argue that the poorest paying less isn't progressive.

There are however, 3 problems. Firstly, while the proposals are good, the way they have been portrayed is a damning indictment of this country's media. There has been an enormous focus on "£40,000 of debt" and "tripled fees" with no recognition of the fact that few students will actually pay much of the increase before the debt is written off in 30 years time. This misreporting is certain to discourage poorer students from attending university which will irrevocably harm social mobility because the media prefer bold headlines and shock stories over substance. The massive numbers of young people protesting the rise in fees is ample evidence of the lack of understanding among young people and it is of great detriment to the economic future of this country that poor students will be deterred from university due to a lack of information and advice about what the fees system actually means for them.

There is also, although this is a different but related issue, a problem with the government's proposals to cut the teaching grant to all but the STEM (Science, Technology, Engineering, Mathematics) subjects. The government intend for the shortfall to be made up in fees however, since students won't pay back most of their fees, the government will end up paying most of the fees anyway so the end result will be a shifting of university funding towards the STEM subjects and away from other subjects. Whilst I recognise that the STEM subjects are the most beneficial to economic growth there are a whole plethora of subjects such as medicine, law, architecture, economics and many others which are also vital to our economy. There are very few subjects that don't aid the economy and those that (arguably) don't often are the ones that contribute most to our culture and whilst I readily welcome an increase in funding for STEM subjects, I think that taking funding away from other subjects is detrimental to the future of our economy and the wealth of culture which makes this country so unique.

The last issue is one of trust. Whilst the new system may be fairer than the old one and whilst it will benefit the poorest graduates and is ultimately more progressive, the Liberal Democrats, each and every one of them, made a campaign pledge not just to not raise fees but to vote against any increase. To go from voting against any increase to tripling fees seems like a betrayal of all the students who voted for them. It is vital to the future of our country that politicians are accountable to the electorate and that they implement what they are elected to do. Politicians must always remember their job is to represent us and so they must be reminded that reneging on promises during the election is not what we elected them to do.

On the other hand, it should be said that perhaps this was the best the lib dems could get. After all, the conservatives wanted unlimited tuition fees so a raise of only £6,000 a year doesn't seem so bad. It should also be noted that perhaps (as in this case) the govt. are actually helping the people who are even now planning more mass protests and so, whilst they may not have implemented the specifics of what they said, the overall effect has been beneficial.

To conclude, welcome the new proposals because they are more progressive than the old ones and, if reported correctly, will encourage social mobility but campaign for the government not to take funding away from non-STEM subjects and think carefully about the liberal democrats, about whether you prefer a government that implements policies it thinks will be damaging because the public insist on it, or a government that does what it thinks is best for the voters, regardless of what the voters think. There is no right answer to that question but it is one everyone liberal democrat voter should be asking themselves and the answer will ultimately determine their future (or lack thereof) as a significant force in uk politics.


GriffoPolitics said...

Just found this from a link on the Student Fees facebook page (you'll know which one). I have to say, having read what is on here, presuming you haven't lied (or been misguided/found wrong facts etc.) then it is very interesting to say the least.
When I first heard about the fees change like most students I was shocked and disgusted at the Lib Dems, not surprised at the Tories though. (yes, I am a Labour party member)
Whilst having looked at your blog post, and reading around the change generally, I have come to the conclusion that the new proposed system is progressive. However I still think, like you said, that many students particularly from poorer backgrounds will be put off by the change.
A couple of points I have been thinking about...
1) The one just above,
2) However odd this may sound to some people, I don't feel right not paying off my debts, I feel like I am not doing my bit, if that makes sense.
3) The Lib Dem's should feel ashamed that they have backed this SOLELY because it was a major part of their election campaign and manifesto not to vote for any increase in fees. Although a part (a small part) feels kind of sorry for them, being dragged into going against their morals to prop up the Tories.
4) The fact that this is seemingly disguised as tuition fees but is in fact a graduate tax like you said, they might as well have just said this is a form of graduate tax, which is what Labour have proposed instead of fees.

ANYWAY. I read your first post, and you seem incredibly similar to me! I am 16 (but in 1st year at college) taking Maths, Further Maths, Govt. and Politics, and Law. (3 out of 4 the same as you) Also I have become increasingly interested in Politics over the past year or two, the same as you. Therefore considering going into politics myself.

I have added you on facebook by the way, hoping you'll be able to accept me so we can possibly discuss Politics (...sad, but interesting for us as you will probably agree). My name is Tom Griffiths.

One question. Where are you on the political spectrum as it were, right/left/centre? Tory/Liberal Democrat/Labour? As I've said, I am Labour. Somewhere between left wing and centre left.

Sorry for the essay, I don't know how to send stuff to you other than by commenting on here :S


Andy Cooke said...

Good summary. Although you're possibly a bit harsh on the Lib Dems on the "betrayal of promises" - tuition fees have a long history of being brought in against promises and lies. Just look at 1997:

April 97: Blair "We have no plans to bring in tuition fees". September 98: Tuition fees instituted; grant abolished

Labour manifesto 2001: "We have no plans to bring in "top up fees" and have legislated to prevent them. 2004: Top up fees legislation passed, tripling fees.

And now Labour's Browne Review, which they got cross-party support for (they got the Tories to agree to stick fairly closely to whatever the Review produced in order to "depoliticise Higher Education" - but they leapt at the chance to make political hay out of pretending that they wouldn't have implemented it (a quick glance at their statements in 2009 would disabuse people of that and of their opposition to a graduate tax when in Government (can't fault them for that - a graduate tax is unfair and deeply flawed)). It's been said that parties are against tuition fees in Opposition and for them in Government, and that seems to be a genuine truism.

I totally agree with your point on the media - they should hang their heads. Especially the BBC - they are the public service broadcaster and have a responsibility to put this across. It shouldn't be left to a 17-year-old politics student!

The Lib Dems have tried on a few occasions to point out that it's effectively a graduate tax (with the unfair bits and core flaws removed - such as the permanent nature, the fact that every course would be valued the same, and critically that we have to provide the same deal to any EU student - who can simply and sensibly head back home afterwards and pay nothing (so UK students would have to be taxed a little higher to pay for it! When you point out to fans of graduate taxes that in order to transition to it, you could simply make the fees infinite, remove the 30-year time limit and excuse you from paying them if you left the country, it doesn't seem as good an idea ...), but the media have their story and won't be budged.

Anyway - it's refreshing to see a student reading the proposals and making logical and reasoned judgements rather than relying on our media. Well written and well-argued post.

Zak said...

Thank you. I probably was a bit harsh on the Liberal Democrats, particularly seeing as I'm am member, but I was after something strong and memorable to finish on and it seemed to fit quite well. I totally agree about how we're getting a particularly harsh time over what both Labour, and now the Conservatives, have also done. Alas people have such short memories when it comes to politics. As to foreign students, I must confess I haven't really got round to doing a lot of research but from bits and pieces I've picked up I was under the impression that they have to pay upfront and that their fees are significantly higher than those for British nationals (feel free to disabuse me of this notion if it's incorrect). Have I seen you somewhere before? Your name rings a bell but I can't quite figure out why. Also, would you be willing to give a 2nd opinion on my draft for a post on EMA? Either way it was nice hearing from you, it always helps to get supportive feedback.

Andy Cooke said...

For foreign nationals, there's two categories: EU and non-EU. Non-EU nationals indeed pay a lot more (I think it's on the close order of £20k per year and reflects the true price). EU nationals have to be given exactly the same deal as British students (and if there are multiple regional deals for British students, whichever one is most "local" - so paradoxically, EU students get a better deal in Scotland than do Welsh and English students! (As they get the same deal as Scots students)).

You probably saw my name on Contented Lib Dem's blog - I commented on EMA just before you did. If you read, I'm a fairly regular contributor there as well. I'd be more than willing to give feedback on your EMA post draft. Can you harvest my googlemail address from this post or should I post it temporarilly? (I don't like leaving it about due to spambots, but I could post it, wait until you've responded, and then delete that post)

Zak said...

probably easier for you to just send me an e-mail to which I can just reply. Mine's