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Review of post-18 education and funding

The Government concluded its long awaited review of post-18 education and funding on 24 February 2022. 

Details of their conclusions were published in the Higher education policy statement and reform. Analysis of the Government’s proposals, background to the review and reaction are included in the Library paper The Post-18 Education and Funding Review: Government conclusion.

Student loan interest rates in 2023/24 

Interest rates were capped for all post 2012 loans (Plans 2, 3 and 5) at 7.3% in September, October and November 2023. The cap was increased to 7.5%, the highest ever level, on 1 December 2023. The caps will now be reviewed every month.

The cap on interest rates for ‘Plan 1’ (pre-2012) income contingent-loans is linked to Bank of England base rates. The interest rate on these loans has been 6.25% since the start of academic year 2023/24. This is also their highest ever level. 

Student loans are the main method of direct government support for higher education students. Money is loaned to students on subsidised terms to help towards their maintenance costs and to cover the cost of tuition fees.

Scale of student loans in England

Currently £20 billion a year is loaned to around 1.5 million students in England each year. The value of outstanding loans at the end of March 2023 reached £206 billion. The Government forecasts the value of outstanding loans to be around £460 billion (2021‑22 prices) by the mid-2040s.

The forecast average debt among the cohort of borrowers who started their course in 2022/23 is £45,600 when they complete their course. Forecast debt is expected to be lower for those starting in the reformed system from 2023/24 at £42,900. The Government expects that around 27% of full-time undergraduates starting in 2022/23 will repay them in full. They forecast that after the 2022 reforms this would increase to 61% among new students from 2023/24.

Trends in interest rates, amounts loaned and outstanding debt

The maximum interest rate on Plan 2 (post-2012) loans is currently 7.5%. This is their highest ever level. The same rate applies to Plan 3 (postgraduate) and Plan 5 (new undergraduates from 2023/24). The interest rate on Plan 1 (pre 2012) loans is 6.25%, also their highest ever level.

Chart titled 'Plan 1 and 2 interest rates jump in 2022/23' showing interest rates for Plan 1 loans and maximum rates for Plan 2 loans from 1998. These rates are currently at new peak levels of 6.25% (Plan 1) and 7.5% (Plan 2).

Chart titled 'Maintenance loans jump in the six years to 2021/22' showing the groth in maintenance loans made to full-time students in England. This reached £8.3 billion in 2021/22.

Chart showing the growth in outstanding debt on student loans. The total reached £206 billion at the end of March 2023.

Student loans in England are large by international standards. The latest OECD analysis found that the average loan in England was substantially higher than in any other country included in the analysis.

Background to student loans and changes since 2012

Graduates repay student loans to the government after their earnings exceed the threshold level. These loans are therefore one form of private contributions towards the costs of higher education. The student loans system aims to ensure that upfront costs do not deter potential students. Graduates repay student loans and they generally have above average incomes.

In his summer Budget 2015 Chancellor George Osborne announced that maintenance grants would end for new students from 2016/17 and be replaced by loans. He also announced consultations on freezing the repayment threshold for five years, allowing some universities to increase fees in line with inflation from 2017 and a review of the discount rate applied to the accounting treatment of loans. These werethe biggest changes to student finance since 2012. When fully implemented they will mean more money is loaned, both per student and overall, and increase the amount that is repaid by middle and lower earning graduates.

On 1 October 2017 Prime Minister Theresa May announced that there would be changes to the student finance system: the fee cap would be frozen at £9,250, the repayment threshold would rise to £25,000 and a there would be a review of the student finance system.

On 19 February 2018, the Prime Minister announced  that there would be a “wide-ranging review into post-18 education” led by Philip Augar. The review is to look at how future students will contribute to the cost of their studies, including “the level, terms and duration of their contribution.” More detail on the review can be found at: Review of Post-18 Education and Funding

The Review report was published on 30 May 2019, Independent panel report to the Review of Post-18 Education and Funding. The report was a detailed analysis of the post-18 education sector and the funding issues faced by stakeholders. The Library’s briefing paper The Post-18 Education Review (the Augar Review) recommendations give more detail. The Government’s final conclusions on this review had been delayed and were expected to be published alongside the Comprehensive Spending Review in Autumn 2021. However, at the autumn 2021 spending review the Government said its response to the Augar report would be published “…in the coming weeks” alongside details of the higher education settlement up to 2024-25″.

The Government’s final conclusions on this review were finally published on 24 February 2022. This made a number of changes to repayment terms for both new and existing student loan borrowers. The Library’s briefing paper The Post-18 Education and Funding Review: Government conclusion gives more details of the proposals and analysis of the impacts.

The Student Finance Explained series of articles looks at financial flows under the current system and the impact of different hypothetical changes to student loan repayment terms, tuition fee levels and grants. The article What could reforms to student finance mean for teachers and nurses? looks at the additional loan repayments that new entrants to nursing and teaching could make over their working lives.

This note gives a background to student loans, statistics on their take-up, total value owed, repayment, public expenditure, arguments for reform and factors that affect take-up. Student Loans Company data used to cover the UK as a whole, but devolution of student support arrangements caused a change in their geographical coverage. The figures from 2006-07 in this note are for England only. The following Library publications give related information about changes in this sector:

The Scottish Parliament Information Centre’s Student Loans and Repayments compares Scotland and England. Data from the Student Loans Company may also be helpful.

This publication contains longer term time series on the value and take up of loans and the amount lent, repaid and the balance outstanding. This can be found in the downloadable Excel file [link above under ‘supporting documents’]. Please get in touch with us at papers@parliament.uk if you would like to access the data in a different format.


Documents to download

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