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Review of Post-18 Education and Funding

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.” The Prime Minister discounted the idea of moving back to a fully taxpayer funded system. It is expected that the review will report in early 2019.

This paper will be updated with any relevant information or changes that come from the review process.

More detail on the review and associated briefing papers can be found on the page: Review of Post-18 Education and Funding

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.

Currently more than £17 billion is loaned to around 1.3 million students in England each year. The value of outstanding loans at the end of March 2020 reached £140 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 2019 was £40,000.

The Government expects that 25% of current full-time undergraduates who take out loans will repay them in full.

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 forecasts summarised in this note assume the current system, with no changes, is kept in placed. If the Government makes any changes to the loan system or loan amounts in their response to this report (expected in Autumn 2019) then they should publish new forecasts.

In the past the loans system has been criticised on a number of different grounds including not covering living costs, excluding part-time students, being too expensive, targeting its interest rate subsidy at higher earning graduates and putting off those who are concerned about graduating with large debts.

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. It does not look in detail at the repayment system in England for new students from 2012/13 which is included in the note Changes to higher education funding and student support from 2012/13.


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