Response to the consultation on student support

Here’s my final response to the consultation on student funding, run by the SG’s Student Support Review.

The  questions are still quite open ended, although the review is now in its final few weeks: it is due to report in the autumn. Where questions are asked about a specific proposal, a “minimum income guarantee”, what is meant by that is not defined. The SG uses this to mean “the maximum amount of support, available only to those at the lowest incomes”, but the questions make it sound like what’s envisaged is something more like the Welsh plan for a uniform support entitlement, provided in a different mix of grant and loan, depending on income.

It’s not clear whether the review is prepared to argue for increased cash investment in support for low -income students, or is asking its questions in the context of taking a zero-sum approach to non-repayable funding. That matters a great deal.  The difference between FE and HE support, in value and legal entitlement, is a critical issue for the review. But it’s had to see how that gets fixed with no new cash.

The concern about this review must be that, having been told that fees are outside its remit, if it is not looking at increased cash investment, it will be tempted to suggest that the SG makes much more use of student loans to plug holes in its living cost support, particularly for those from low incomes and those studying on FE-level courses (there’s  some overlap there).  In stacking up debt even more disproportionately among those from the lowest incomes, that would be a regressive move.

In theory, however, the review offers the chance to make some improvements, including to reverse some of the worse features of the 2013 changes: not just lower grants but also a lower income threshold for maximum support (only partially corrected last year), the introduction of very sharp stepped reductions in support at particular incomes, and the removal of any extra support for study in London.  It is also a chance to sort some longer-standing issues, such as the lower grant offered to independent (mature) students and the relatively poor levels of support available at incomes between £34,000 and around £45,000. There are new things to look at, such as whether students on 1+4, 2+3 or 2+4 models should have a year (or two) of their debt written off, so that the SG is putting its money where its mouth is, in regard to its increased emphasis on college entry to HE as a route to university.

It’s also a chance to remind everyone of the current government’s commitment in its manifesto to increasing the loan repayment threshold to £22,000 (it is currently around £17,500; it is £21,000 in England and in Wales) and reducing the write-off period from 35 years to the 30 years used in the rest of the UK.  Although this unqualified manifesto commitment was remitted to the review (not a common move for a single party government so soon after an election), surprisingly perhaps the consultation does not include questions asking specifically about it.  It would be the most effective way to help lower-earning graduates, and if the review does not hold the SG to making these changes, it will be very disappointing.

The consultation ran from the end of June to the end of August. That’s less than the SG’s standard 12 weeks, and coincided with the summer break.  If the review nevertheless gets a decent number of responses, it will be evidence that a consultation like this has been long overdue. If it doesn’t, then I suspect the timing will turn out to have been a large issue.

Sections in italics below are my responses.  I’ve only answered the ones where I felt I had something to say.

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1 – Greater alignment of financial support for students across colleges and universities with increased fairness in what all students can access;

Rationale: to create parity for all students whatever the level of study

1.1 Should there be parity in funding levels available to all students, based more on need rather than the level of study?

This is a hard principle not to support. But if it would simply mean spreading the existing cash resources available for those in the greatest need even more thinly, it would be very problematic.  Taking already limited support from one low-income group to help another cannot be the right answer.

There is already some evidence (previously shared with the review team) that take-up of grant, particularly the £500 level of YSB, has fallen as grant has reduced in value: it is plausible that some students do not regard it as large enough to justify asking their families to go through means-testing. Cutting existing HE grants further therefore risks not only higher debt or reduced grant support at low incomes, but low income students falling out of means-tested support entirely.

What is meant by “need” also matters here. Underlying expectations of family support (cash and kind) at different ages and stages are especially important. Does a 17 year old studying at school have the same need for state help as a 19 year old from the same household who is entering post-school education?   There is a strong argument that post-school level young people need to be supported in having more choice over where they study and live, and that our expectations of direct family support should reduce at that stage.  The review could usefully take a view on this.

1.2 How could parity be achieved and how can we maximise the income available to students?

It is very important that grant and loan are not treated as inter-changeable forms of living cost support. Otherwise, it is very likely that those most dependent on state help with living costs will end up either with the most debt (particularly if they do not move directly from school to  university) or not taking out their full notional entitlement.

My MSc research (already discussed with the review team) showed that a significant minority of those entitled to YSB do not take out the loan required to top it up to obtain their maximum entitlement to support.  Those in college-level HE are particularly likely to be non-borrowers, especially in first year.  Any proposals here should take into account the evidence we already have of the lower propensity to borrow of those on sub-degree courses in college.  Grant-only HE students receive less support than those who receive an FE bursary.

It is not clear whether the review is prepared to argue for higher investment in non-repayable forms of targeted student support for those from lower incomes. This is however the only way to improve living cost support for those at low incomes which can be relied on to be largely taken up by that group, and which will clearly avoid them facing a later penalty for their lower-income starting point, in terms of having to repay a larger debt.

1.3 How can parity in funding be achieved without having a negative impact on benefits?

I cannot comment on the interaction with benefits, although I would hope the devolution of some benefit powers to the Scottish Parliament would give Ministers more flexibility to deal with the interaction with student support, for example by filling gaps where benefits are withdrawn. I am aware that the interaction with Carers’ Allowance can be particularly difficult for some students.

1.4 What is the most effective way to determine which students are most in need of bursary support?

The Rees Reviews in Wales noted that there was scope to refine the means-test and that some systems include wealth/assets in the assessment. 

The system could do more than it currently does to take into account the number of dependents there are in a household and the impact of that on family liquidity. Students from middle and higher income households which are supporting multiple children in post-school education could be given access to an additional loan entitlement, as a de facto way of enabling parents in this situation to spread their contributions to their children over a longer period.

The move in 2013 from tapers to large losses in entitlements at three particular incomes (especially £34,000) should be reviewed: it results in disproportionate loss of support for minor changes in income.

The age discrimination in HE grants should be removed, so that students no longer receive a lower grant (and higher loan) because they are classed as “independent”. The original justification for the different treatment of young and independent students was that independent students had access to a separate Mature Student Bursary Fund and were not liable for the graduate endowment. Neither of these is still true. Mature students are disproportionately from disadvantaged backgrounds, and have historically received additional support in recognition of their great financial liabilities: yet in Scotland at present are expected to borrow more.

2 – A simplification and clarification of the systems used to provide financial support to students in Scotland today;

Rationale: to remove some of the unnecessary complexities and enhance the student experience

2.1 What are the key features of the current system that may deter or make it more difficult for students to access, or stay in college or university?

The heavy reliance on loans for living cost support at lower-incomes risks deterring some students from taking out their full support, increasing the risk of excessive term-time employment and/or dropping out.

The sharp drop in total support available as soon as income reaches £34,000 and relatively low total support to those from households with incomes between this and around £45,000-£50,000 carries the same risk.  The total support for those in this income range is unusually low, and therefore the expectation of family contributions unusually high, within the UK. Scotland is also exceptional in the UK in withdrawing all grant support at £34,000. There is a strong case for using grant rather than loan to improve the support for this group.

2.2 Do any of the current rules and/or practices in place make it harder to access or maintain study?

2.3 How could the way in which financial support is delivered to students at college or university be improved?

3 – Better communication of the funding available, including a clear explanation of the repayment terms of student loans;

Rationale: to assist students and prospective students to understand what financial support is available and when and how they access it

3.1 What type of information on funding would be helpful to students – both prospective and continuing?

More information should be available in an easily absorbed form similar to that developed by Sarah Minty of the University of Edinburgh (here).

The SAAS website should be substantially improved, to be more intuitive and more easily navigable between sections.   An online calculator, as available for other parts of the UK, should be developed.

3.2 How and where should that information be made available? Would a particular format be more helpful?

Online, paper-based and face to face information all have a role.

3.3 When should potential students first be given information on financial packages of student support?

Young peoples’ concerns about funding as a barrier to future study should be explored early, possibly at the point when N5 subjects choices are being made, to make sure that serious misconceptions aren’t limiting choices. But detail on funding may be better left till later, not least as it can change. Decisions here should be guided by research, or further research should be commissioned, if it does not exist.

3.4 What role should colleges / universities/ schools play in providing information on student support?

They should all have staff able to provide reliable advice on this.

3.5 What more could be done to support parents/guardians to better understand the student support funding available?

This group should be specifically targeted with information, as there is emerging evidence that they are the single largest influence on young people’s understanding of their financial choices.

It is not clear why parental contribution expectations ceased to be published several years ago. Even if there are (legal?) reasons for this decision, some way has to be found to tell parents about their expected contribution, for as long as support decreases as income rises, and to make it clear that this is a very long-standing part of student support in Scotland at middle and high incomes.

3.6 What could be done to help students understand more about student loans, including how and when they are repaid?

Scottish Ministers’ negative rhetoric about student debt, used to make comparisons with other parts of the UK, risks feeding Scottish students’ reluctance to make use of student loans. The Scottish Government needs to consider whether it is sustainable to rely so heavily on student loans for living costs while being so generally critical of student debt elsewhere. The common implication that £27,000 of debt is unreasonable sits uneasily with that being around the amount a low-income student is expected to accumulate in Scotland over 4 years.

The leaflet produced by Sarah Minty, cited above, provides a very good summary of the loan system for students, which could be the basis of information provided in other media.

4 – Further consideration of the levels of funding required for all students and the funding mix.

Rationale: to provide more funding, particularly for students from the most deprived backgrounds, and funding choices for students

4.1 Should a ‘minimum income’ guarantee be introduced across all students?

Does this mean following the Diamond Review model of giving all students access to the same value of support, using a mixture of grant and loan? If so, two considerations are:

first, the more this is provided by loan at low incomes, the more likely it is that a substantial of minority of students will either not benefit in practice or will be relatively disadvantaged long-term by having larger debts (see above);

second, if loans to those at high incomes are made available at the current  highly-subsidised interest rate, it is more likely that this cash will be used not for immediate support needs, but to give these students additional long-term advantages, for example by  being used as low-cost funding towards buying property, funding unpaid or low-paid internships, or postgraduate study. The Rees Review found evidence of such practices in Wales when interest rates there were pegged to inflation, as here.  There is a strong argument that any loan support made available to those at higher incomes for living costs should be provided at a less subsidised interest rate, as a disincentive students from higher incomes using student loans to increase their relative  advantage.

4.2 What should the ‘minimum income’ guarantee be, and why? Should it be linked to the Living Wage?

4.3 Under what circumstances should a ‘minimum income’ apply?

A “minimum income” would imply that it is a minimum for everyone.  However, that label is currently used in Scotland to mean the value of the maximum support available to those at the lowest incomes, which may be confusing for students. 

If this question is intended to explore the income level up to which the maximum value of support should apply, in line with the meaning of the current Scottish MIG, then the current cut off is relatively low, particularly given that support then falls by £750 in a single step. It is lower in cash terms than applied in Scotland in 2012, and therefore now even lower in real terms. It is substantially lower than in England. It is closer to the Welsh and NI level but these systems do not then withdraw support so sharply.  There is a strong case for increasing the income threshold for maximum support, especially if a stepped system continues.

4.4 What is the appropriate balance of bursary / loans within a ‘minimum income’?

Bursary should provide the bulk of support for those at lower incomes.  It should at least be high enough to mean that they are not expected to rely more heavily on loans than those at higher income, as is currently the case.

4.5 Rather than only Higher Education students, should all students have the option to access student loans, regardless of their level of study at college or university (in addition to existing bursary entitlement)?

The rationale for the introduction of student loans in 1990 was that graduates are likely to have higher earnings from their participation in HE. There is already evidence that this is far less likely to be true for those on HN-level courses. It is very questionable whether this argument can be applied to FE students.  Unless the repayment threshold is set much higher, these students would face a significant risk of seeing a net financial loss from taking part in FE, if they take out student loans which they then have to repay.

At a more practical level, as already argued, it is very likely that many FE students would not take out a loan, so that the government might have addressed their living cost support needs on paper, but not in practice.

Loan support for FE is also likely to lead to a much greater accumulation of debt by low income students who later progress into HE, unless such students can have earlier years written off if they progress.

4.6 Are there ways that the terms and conditions attached to student loans ( e.g. interest rate or repayment threshold) could be reviewed to support consideration of extension to all students?

The present government undertook in its manifesto to substantially increase  the loan repayment threshold and bring the write-off period into line with the rest of the UK. As Barr et al have shown, these two changes would do the most to protect low earners and thus make the loan scheme more progressive. The review should strongly recommend that these commitments are honoured for all students.

5 – Any other comments, ideas and innovations

5.1 Please use this space to provide any other comments which you believe are relevant to the review. In addition, your ideas and innovative suggestions are welcomed to help inform our final report on how the student support system can be fit for the future.

The decision to remove the additional living cost allowance for those studying in London should be reversed. Scotland is the only UK jurisdiction not to provide such an allowance.  Only small numbers are affected: the cost would be small and would come from the loan not the cash budget, if models elsewhere are followed. 

Ways to limit the accumulation of additional debt by those at lower incomes in 2+3, 1+4 and 2+4 models of study should be explored, including debt write-offs for repeat years.  Although this might reduce the incentive for students to avoid repeat years, (a) these  students would still face a penalty of later labour market entry and (b) it would encourage these students to make post-college choices based on their best educational outcome, not on limiting debt. It would also increase the incentive for government to reduce the scale of repeat years.