Danny Dorling on student debt: a bonanza for the “1%”?

Professor Danny Dorling has just had a long piece in The Guardian on student debt (“Tuition fees: a bonanza for the 1%”), arguing that fee and loan policy provides a prime example of how the interests of  “the 1%” are prioritised over those of the rest of the population.

There are some useful points here – not least, his observation that loans create a higher de facto marginal tax rate on those whose parents cannot meet all their costs upfront, a point made elsewhere on this site in the context of Scotland’s system of limited maintenance grants.

Dorling does acknowledge the funding of living costs as an issue in all this.  However, his focus is on the impact of fees in England, now and in a future where (he suggests) they might rise much further, at least for some  courses, and in which he posits that the loan system might be privatised.

He argues that while a “super rich”  “1%” can get away without borrowing, the rest must carry the burden of student loan debt.  In practice, the number who take out a fee loan in England is below 90% – though he’ll be right that non-borrowers are still largely the most wealthy.  Around the same proportion take out a maintenance loan. In Scotland, the figure for borrowers is even lower, at around two-thirds.  These borrowers will again all mainly be less well-off, borrowing for living costs.  One-third of non-borrowers is good news for more people – but it does not of course prevent  the poorest third of so of households in particular from shouldering a pretty hefty amount (and disproportionate share) of living cost debt in Scotland.  In other words, while the situation in Scotland doesn’t really fit into a story about a tiny minority of the “super rich” versus the rest, that doesn’t mean serious problems of inequality don’t arise.  It’s just that in Scotland, following Dorling’s line of thinking, it is broadly the professional/managerial class versus the rest, with the very poorest being particularly at a disadvantage here.  In other parts of the UK, the detailed distribution of borrowing means the almost 90%  of students who borrow are roughly in the same debt boat, while just over 10%  are debt free.

Dorling  is a bit loose with the detail in places, although sub-editing and space restrictions may be partly to blame. For example, his grant figures are for England only.  He divides these over 52 weeks. The same figures are much higher in Wales (eg £99/week at lowest incomes) and much lower in Scotland (£33 for young students, and only £14 for mature ones – and £0 at £40k). He suggests that failure to repay a student loan risks bankruptcy, when in fact unpaid loan will be written off after 30 years (35 in Scotland):  though graduates may of course be pursued by the SLC for non-payment of those sums which they are regarded as being due to pay.  The piece does not acknowledge that repayment thresholds  and interest rates are different in different parts of the UK, which has a significant effect. Repayment kicks in sooner in Scotland and Northern Ireland and takes a larger absolute sum out of low incomes, so that lower earners are likelier to pay back any particular sum – but lower interest rates mean debt accumulates more slowly.  The equity implications of the different schemes are discussed here.

Professor Dorling also quotes outputs from the UK government repayment calculator without explaining whether these figures are given in cash or net present value.  I am fairly sure these will be cash figures, which are a tricky basis for comparison over a long period.  It is interesting however that he identifies that for someone starting on a very low salary, the actual repayment associated with £21,000 of borrowing (now a typical amount for a low-income student taking a Scottish degree) and £50,000 of borrowing (about the most which could be accumulated in England over 3 years) would work out much the same in practice.

Dorling also plays down the living cost issue somewhat,  by a reference to European students in low/no fee systems living at home.  This overlooks that many European systems either admit far fewer young people or have much higher drop out rates, or both, often don’t do so well on widening access and also often provide less help in any form with living costs: see here. Such systems also of course strongly favour city-dwellers in decent housing.

Dorling’s piece implies that loans have been introduced essentially as an ideological move, rather than because of any pressures on funding arising from changes to the higher education system.  However, it cannot be ignored that the move away from a fully cash funded system  – not just in the UK or the US, but in many other countries – has coincided with  the large growth in student numbers over the past 20 to 30 years.  So when Dorling says, “I believe my generation is opting out of an obligation to pay to fully educate the much smaller generation behind it,” it’s essential to understand that a much larger proportion of that “smaller generation” now expects to stay on in education for longer.  Any argument against the use of student loans needs to acknowledge that the cost of the higher education system is much higher now than it was 20 or 30, let alone 40 or 50, years ago, and will make a larger dent in the money available for other things, whether through higher taxes or less public spending elsewhere.

Indeed, that’s why reviews such as Dearing and Browne, and in Scotland Cubie, advanced the argument-from-equity for graduate contributions, whether as loan or tax, identifying that graduates (still, it seems) can typically expect to benefit financially over their lifetimes from their higher education, ie it is fair to expect those who do earn more later to contribute at least something towards their time at university, rather than fund it all from general taxation.  Though survey work in Scotland suggests widespread support for students making some contribution, possibly means-tested (for example, this poll from 2011 or the long run of results from the Scottish Social Attitudes Survey), many people are strongly resistant to this argument and to have Dorling’s take on it would be interesting and useful.

For all these caveats, Dorling’s forceful identification of  the divide between borrowers and non-borrowers of student loan as a critical problem for equity is to be greatly welcomed and is as relevant to Scotland as to the system in England.