Recently, the Labour party have been talking about their plan to decrease tuition fees if they win the next election. Whilst this feels a good thing to do on the surface, the more I read on the subject, the more I come to realise that this isn't really going to help. If you're interested in this topic (like me!), you should definitely have a read of Martin Lewis' response to this potential policy here. He's really great at drilling down into what the financial effect of fees and is an invaluable resource for information on all kinds of financial matters.
So why might lowering tuitions fees not be good news? Well, it looks like only the well off are going to do better out of this. That's the people who get the super high flying jobs with starting salaries in excess of £35000 when they leave university, which is small part of the graduate population. Why do they benefit? Because they are the only ones who'll pay off their loans before they are written off if hey only make the basic repayments. In response to this issue, Labour are saying they'll have a higher interest rate for high earners, but it's only going to be 1% more than the standard rate so whether this will help or not is debatable. However, having said that it's already the case that the amount of student loan repaid on £9000 fees is the most for people on £35000 to £45000 annually. Therefore, people with really high paid jobs get a better deal as it stands anyway! In the past it's been suggested that Labour might move away from fees to a 'graduate tax' system of paying for university tuition. As far as I understand it this will mean that graduates pay a higher rate of tax compared to non-graduates and this might redress the balance of payment with earnings.
Another important thing to think about is that Labour aren't talking about what they'll do to make up this sudden £3000 shortfall per student to the universities. Will it pay an extra £3000 per student? Or will that money go away? If so this could be very detrimental to the long term financial plans universities have, especially if the drop is initiated immediately. Also, will universities be forced to keep their access programmes going? At the moment if universities want to charge top fees they have to provide bursaries for students from less well off families. Will these stay or go?
A more pressing problem is the going suggestion from the current government about when you should start paying your loan back. At the moment you'll only start to repay your loan if you earn over £21,000 and this will go up with inflation each year. However, they're thinking of fixing this figure so that as the years go by people will gradually pay more. That sounds like an ok decision to make in principal if you tell people upfront, but there are rumours that they'll do this to people who have already signed up for university and loans when it was promised that the amount you have to earn to repay the loan will go up each year. Which is not on at all in my opinion.
At the end of the day, I'm a supporter of no tuition fees. I've seen people be put off going to university because of the debt issue. I know my student loan is going up and up while I do my PhD and I don't really mind because either my 9% contributions from when I start work will pay it off, or they won't and it'll be written off eventually, but either way I'll pay what I can afford through the tax system. Would I be in favour of a graduate tax? Possibly, as long as it's fair and means people pay a reasonable amount into the pot it might not be too bad. But we must always weigh the need to pay for universities against the need to ensure that everyone has equal access to education.
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