The increasing use of student loans to fund higher education students is a global phenomenon, fuelling HE expansion and participation, and social mobility. The policy goals underpinning loan schemes around the world vary. In England and in many other countries (e.g. USA, Australia, New Zealand), their central objective is cost-sharing – another global trend. Here loans seek to reduce public expenditure by shifting more costs onto students and their families while simultaneously facilitating, or making more acceptable, tuition fee increases. These were key rationales underpinning the 2012/13 reforms of higher education funding in England.
It is far too early to know about the long-term effects of the 2012/13 policy changes. One development is certain – the rise of undergraduate student loan debt. Nearly all English universities are now charging undergraduate tuition fees of around £9,000 a year compared to £3,375 before the reforms. The vast majority of English full-time undergraduates, who are young school leavers, are taking out student loans to cover these fees. They are also getting student loans of up to £5,555 a year towards their living costs (if living away from home). So in 2015, we can expect to see undergraduates graduating with debts of around £43,500. In 2011/12, average debt on graduation was a quarter of that at £10,299 (Pollard et al, 2013). So in future, most graduates will owe more money than their parents earn in a year.
Our LLAKES study is looking at this grand social experiment, with unknown outcomes. Specifically, it is examining prospective undergraduate students’ attitudes to debt and higher education, and how these have changed over time, using findings from research undertaken in 2003 as a baseline. The study will ask whether concerns over debt and the costs of HE influence potential students’ decisions about entering HE for the first time, where and what to study, and mode of study? To what extent are would-be students debt averse, and which groups are most likely to be debt averse?
There is already some evidence that older students, and especially part-time undergraduates, have been deterred from entering higher education because of the new funding arrangements. Following the 2012/13 reforms, part-time tuition fees doubled or trebled. For the first time, part-time undergraduates can access student loans to cover their tuition fees. But only about a third of part-time students are eligible for these loans, and loan take-up has been far lower than predicted, suggesting that loans are not necessarily perceived by would-be students as an adequate safeguard against the risks of part-time study. As seriously, the majority of potential part-time students do not qualify for loans. They have to pay these higher fees up front and out of their own pocket.
The unwillingness of would-be part-time undergraduate students to take out a loan or to pay high tuition fees for an uncertain return should not be surprising. Part-time students are older and have family and financial responsibilities. In times of economic hardship or uncertainty, mortgage repayments and basic provision for children are likely to take priority over part-time study costs. Discretionary and non-essential spending, including spending on study, is likely to be squeezed. Macroeconomic conditions, therefore, have a greater impact on the demand for part-time study than for full-time study, and part-time study is far more price sensitive. Put simply, now part-time study is just unaffordable for many potential undergraduates because of the changes in student funding. And the net result is that between 2010/11 and 2013/14 the number of UK and EU part-time undergraduate entrants to higher education institutions and further education colleges in England fell by 46 per cent (Oxford Economics, 2014).
LLAKES project 1.4: Student Debt, Higher Education Participation, and Intermediate Skills Development