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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 2022/23

RPI inflation to March 2022 was 9%, so the maximum interest rate in academic year 2022/23 will be 12% (RPI+3%) unless it is capped to keep it in line with the prevailing market rate for comparable unsecured personal loans. The IFS has said that under the current policy there is a lag in how caps are implemented and, unless an alternative approach is adopted, it it could take sixth months before rates are capped in 2022/23. 

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

Scale of student loans in England

Currently almost £20 billion is loaned to around 1.5 million students in England each year. The value of outstanding loans at the end of March 2021 reached £141 billion. The Government forecasts the value of outstanding loans to be around £560 billion (2019‑20 prices) by the middle of this century. The average debt among the cohort of borrowers who finished their courses in 2020 was £45,000.

The Government expected that before its 2022 reforms only 25% of current full-time undergraduates who took out loans would repay them in full. They forecast that after the reforms this would increase to more than half among new students from 2023/24.

Trends in interest rates, amounts loaned and outstanding debt

Background to student loans and recent changes

Graduates repay student loans to the government after their earnings exceed the threshold level. These loans are therefore 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.

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.


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