Net effects of grant cuts and graduate endowment abolition: underlying calculations

This post provides the detailed data underlying the calculations at pp43-47  of  The Fairest of Them All? on the net effect on Scottish students at different incomes of grant reductions and the abolition of the graduate endowment, over the period from 2006-07 to 2014-15.

The graphs showing how all young students at incomes below £30,000 face net higher debt as result of grant reductions, even after taking account of the abolition of the graduate endowment, are provided again here,  with the associated data tables added GE and grant effects.  The largest losses are at incomes between around £17,000 and around £24,000.  Up to  £30,000, young students studying for:

• 1 year (eg HNC)  are between £1,000 and £2,000 worse off,
• 2 years (eg HND)  are between £2,000 and £4,000 worse off,
• 4 year  honours degrees are between £2,000 and £5,000 worse off,
•  for 5 years, which will include many moving from an HN to a degree without full credit, as well as courses such as medicine, are between £3,000 and £7,000 worse off.

At low incomes, only mature students are better off, because they received no grant in 2006 and now do, though less than they did between 2010 and 2012, and they remain those most indebted group of students, overall.

The calculation of a £20m annual gain for those from higher incomes was reached by working out:

1. what the total annual take from the graduate endowment would be now, had it continued at its previous level in real terms (£2,700).  This was calculated using the figure provided by the Scottish Government at the time of its abolition for the number of students who would be liable (11,500), uprated to reflect the general growth in the number of students receiving fee support from SAAS for a first degree over the period (10%).  That gives just over £34m.  A different process for estimating this figure, based on government figures on actual income in 2006-07 (p41),  gives £32m. The calculation is not very sensitive to different assumptions about growth in numbers: reducing that to 5% only removes around £1.5m.  So assuming a figure over £30m  for total income looks solid.
2. how much of this would have fallen to students from incomes above the mid-£30,000s.  In the report, I used an estimate of 60%, reflecting that while around half of SAAS-supported Scottish students fall into categories below £40,000 (leaving half above) the  groups who  were not liable for the endowment (mature and HN, especially) account for a disproportionate number of poorer students.    So students from higher incomes will make up more than half the group liable for endowment. In fact, a more detailed exercise to remove mature and HN students suggests the split is likelier to be around 67%/33%.

Additional support for assuming students from better-off backgrounds were more likely to pay the endowment comes from  this  Scottish Government report, which noted that:  “In 2011-12, 60.5% of full-time first degree students from Scotland’s 20% most deprived areas who were in the first year of a course would have had to pay the graduate endowment fee if and when they completed their course. This compares with 73.7% of such students from non-deprived areas in Scotland.”  In passing, the report also estimated that the absolute number of new students in 2011 from the 20% most deprived areas who would have been liable to pay the endowment, was 1,235.  It adds that students from this background had a 78% completion rate.  So of students coming from the poorest 20% of neighbourhoods in Scotland, fewer than 1000 appear to have benefitted from paying the endowment – before taking into account their grant losses.

Note:  these web versions correct the grant figures at 4 income points (£24,25, 34, and 35k): the original report used figures for grant for young students in 2014-15 which were £500 too high in each case and therefore underestimated the grant loss over the period in these four cases.  No other figures are affected.