This post discussed how student support regimes vary around Europe, with the caveat that comparing the content of student finance systems provided no information about how those systems compare in terms of widening access, retention, their cost and other important things.
The OECD’s Education at a Glance provides data on completion and graduation rates. These figures will reflect the period when fees were around £3000 in England, Wales and Northern Ireland and pre-date the rise to £9000 in England (and for non-domestic rUK students in the devolved administrations). [Update: this post is based on the figures in the 2013 edition of Education at a Glance: the 2014 version is now out here.]
Chart A4.1 shows that for students who enter a first degree programme, the OECD average for completion is just below 70%. On this measure, Finland, Spain and Denmark stand at 75-80%. The UK and the Netherlands are at just over 70%, while Norway is at 60% and Sweden 55%. Confusingly, the identically-titled Chart A4.2 gives a slightly different result, in which the UK does relatively better (more like Denmark than the Netherlands). But in both cases, there is a clear pattern that Norway and Sweden have relatively low completion rates within the OECD. As the report notes, “there is no clear relationship between the amount of tuition fees charged by tertiary type A educational institutions and completion rates”.
Chart A.3.2 in the same report deals with the percentage of young people who are expected to graduate for the first time from tertiary-type A programmes during their lifetimes. Iceland and Poland show the highest figures here (over 60%), with the UK third at 55%. Denmark is at 50%, with Finland, Sweden, Norway, Ireland and the Netherlands all between 40% and 45%. Below the OECD average are Austria, Italy, Germany, Spain and Switzerland, at between 30% and 35%. Once sub-degree qualifications are added, the UK has the highest figures in Europe (70%).
Box A4.1 helpfully brings together data on the interaction between entry rates, graduation rates and completion rates, which brings out that, while entry rates are higher in all the Nordic countries, the UK’s better record of converting entrants into graduates means it overtakes them all on graduation rates in the population. The UK indeed is unique in the OECD in combining a close match between entry and graduation rates with a relatively high overall graduation rate.
For the countries discussed on the previous post, a picture begins to emerge from the OECD data of Denmark and the UK both generally pretty strong performers for completion and graduation rates, and Norway and Sweden well below the OECD average, with others showing a more mixed picture.
These are complex figures, capturing effects which are in turn influenced by all sorts of factors. As ever, caution is advisable in drawing easy conclusions. In the context of the debate in Scotland, their main value is to reinforce the complexity of comparing different systems and to demonstrate the limitations of comparisons based on one single parameter.
There’s lots more interesting material in the OECD report, including figures on student support and general spending. More on that to follow.
This useful post on Bella Caledonia by Jim and Margaret Cuthbert (both former government statisticians) puts the issues raised by tuition fees into a European context, linking to a EURIDYCE report from 2011, Modernisation of Higher Education in Europe: Funding and the Social Dimension 2011 available here (look for the report dated 16 September 2011).
Their focus is fees (including some interesting speculation about the general future of cross-border fee funding in Europe), so they don’t say much about wider student support. They do though note that some countries use tax incentives and family allowances as part of the package. Questions could be asked about how far tax reliefs tend to exclude the least well-off, which may explain why they do not feature in any of the Scandinavian systems, for example. However, the interaction between student support and the tax and benefits system is one which a future Scottish Government might want to look at further, either under independence or if there is further devolution of those functions.
More generally, it is regularly often observed that while fees are often charged across the EU, they are at substantially lower levels even than those pre-dating the 2012 hike in levels. But we hear less about what living cost support goes with that. So this EURIDYCE report is a useful resource for those interested in that dimension. It is now a bit out of date, but it is possible to update the information using other on-line sources.
Notably, the Scandinavian countries all assess students independently of their parents, once they are too old to receive family allowance (ie child benefit equivalents). That can have interesting consequences. As this article (whose arguments will seem familiar to readers of other posts on this site) explains:
“Swedish colleges and universities are free. Yep. Totally free.
But students there still end up with a lot of debt. The average at the beginning of 2013 was roughly 124,000 Swedish krona ($19,000). Sure, the average US student was carrying about 30% more, at $24,800….
85% of Swedish students graduate with debt, versus only 50% in the US. Worst of all, new Swedish graduates have the highest debt-to-income ratios of any group of students in the developed world (according to estimates of what they’re expected to earn once they get out of school)—somewhere in the neighborhood of 80%. The US, where we’re constantly being told that student debt is hitting crisis proportions, the average is more like 60%. Why?
College in Sweden is free. But rent isn’t. And food isn’t. … But again, this stuff isn’t free for students in other European countries either. So why do Swedish students end up with more debt? It’s pretty simple, actually. In Sweden, young people are expected to pay for things themselves instead of sponging off their parents.”
In passing, the figures for average US student debt suggest that it will be pretty similar to what is now facing low-income Scots … but that’s another story. The piece also includes a useful graph showing how in many non-Scandinavian European counties, low fees correlate with much more limited access to state help with living costs, raising a real “ability to pay” issue.
Generally, Scandinavian levels of living cost support appear to be at a similar level to those in the UK, but before taking into account any differences in the cost of living. Finland however provides a lower amount of living cost support across the board. Others – including the very generous Danish system – are moving to an increasing focus on linking support to academic performance. Iceland has a wholly loan-based system of living cost support. Loan schemes in all these countries charge higher interest rates than in Scotland and have a variety of repayment terms, linked to a great or lesser extent to earnings.
Ireland makes no use of loans, but its total maximum living cost support is much lower than in the UK. Its student contribution is 3000 Euros pa in 2014-15. This is means-tested, so that only a proportion of students from higher income households pay it. Those who are liable receive no state help (ie there is no equivalent to the UK’s fee loans) and have to find the cash to pay for it upfront.
In 2014-15, the Netherlands will charge a fee of 1,900 Euros (although in some cases fees can be up to 5 times higher, with students over 30 among those charged more). Students can borrow to cover fees. The Netherlands means tests on parental income for around two-thirds of support, which has a maximum value similar to that in the UK. Some or all of the loan repayment can be waived depending on academic performance.
This table Student support in the EU has a go at summarising some of the key features of these schemes, with some updating, with the caveat that any summary of these various models will not do justice to their full complexity. This site is another useful source of information, both on fees and living cost support across Europe. In all this it’s worth remembering that looking at the systems in this way tells us nothing about their relative cost (a non-trivial issue, as long as there is competition for public resources) and how well each system performs in supporting participation and access by those from poorer backgrounds, or retention and successful completion, or access to different types of HE. In Denmark, for example, this study (you will need to open the linked PDF) notes that “short-cycle” courses accounts for much of the country’s higher education, with levels of participation in degree-length HE relatively low in European terms. Also, it’s worth asking – why only compare ourselves with Europe? As the site linked at the start of this paragraph observes, compared to the rest of the world, Europe is unusual in generally setting very low fees.
How would we feel about having no grant (Iceland)? Substantially reducing the total value of living cost support (Finland, Ireland)? Making support more dependent on academic performance (Denmark, Norway, the Netherlands)? Increasing the interest on loans or reducing the link between repayment and earnings (widespread)? Switching more of the opportunities for HE away from degrees and towards HNs (Denmark)? Charging older students more (the Netherlands)? No state help with living costs for most students (Spain and others)?A cultural shift away from parental contributions and towards complete reliance on loans at higher incomes (Sweden)? These are all features of one or another of the low/no fee European systems sometimes looked to as exemplars. Some of them will appeal as policies to some readers, but not to others.
In other words, systems come as a package and while comparisons are always interesting, they should be handled with care.
A quick note on the way interest rates apply in the 2 current UK loan schemes.
Under the old scheme, called Plan 1, still used by Scotland and Northern Ireland, the interest rate is tightly capped. As the SLC explains:
“From 1 September 2013 until 31 August 2014, the interest rate for the Plan 1 Income Contingent Repayment Loans will be the lower of the Retail Prices Index in March 2013, or 1% above the highest base rate of a nominated group of banks. As the RPI for March 2013 was 3.3%, the maximum rate of interest you will be charged between 1 September 2013 and 31 August 2014 is 3.3%. However, due to the low interest rate cap, the rate from 1 September 2013 will 1.5% until further notice, but that rate may vary if the bank base rate is increased or decreased.”
Under the new scheme, Plan 2, being used for new students in England and Wales, the interest rate is higher:
| Income | Interest rate |
|---|---|
| While you’re studying | Rate of inflation (Retail Price Index) plus 3% |
| £21,000 or less | Rate of inflation |
| £21,000 to £41,000 | Rate of inflation plus up to 3% |
| £41,000 and over | Rate of inflation plus 3% |
Retail Price Index (RPI) plus 3% is currently 6.8%. But this rates applies only while students study and once they are relatively high earners. Otherwise they are on lower rates, though still higher than in Scotland or Northern Ireland.
This post explains why work by Nicholas Barr challenges the intuitive response many people will have, that the lower the interest rate on student loans, the fairer the scheme is to those on lower incomes.
Within the Plan 2 scheme, high interest during the period of study will strike many who think of themselves as progressive as intrinsically a bad thing. However, it acts as a disincentive to people taking out loans not for immediate use, but with the intention of banking them. That reduces the risk that a high minimum universal loan can have a regressive effect – for example, if young people from richer homes use that to build a fund they can use after university to obtain further advantages in life, say, by making it possible to do an internship or a taught postgraduate qualification. That option will not be available for those for whom the loan provides essential living cost support.
In the new Scottish system, better-off students whose parents are prepared to continue covering their living costs now have the ability to put away nearly £20,000 over 4 years at an interest rate of 1.5%, as a buffer against the ups and downs of post-graduation life. They can repay it without penalty at any point. It’s not the biggest way the current system in Scotland entrenches existing advantage among students in higher education – that remains undoubtedly the skewing of Scottish graduate debt as a whole towards the poorest students. But it’s one we shouldn’t lose sight of completely.
The various things governments in the UK do to subsidise the student loan scheme benefit different groups of students in different ways.
Nicholas Barr and colleagues at the LSE have argued persuasively that the income threshold and, particularly, the write-off period for student loans have a progressive effect, by reducing the repayments taken from lower-income graduates, while by contrast the interest rate subsidy most benefits higher earners. To summarise a complex set of arguments worth reading in full, that’s essentially because if you never repay your original loan in full, it is irrelevant how much interest it has racked up: you’ll never have to deal with that. By contrast if you earn enough to pay off the whole loan, you will notice the difference between lower and higher interest rates. This is likeliest to apply to higher earners.
Barr’s arguments about the interest rate possibly apply less strongly in Scotland. That’s partly because graduates here are more likely to have to repay all their borrowing, because the total amounts borrowed are not as high as now expected in England. Also, because we expect students from the poorest homes to take on a disproportionate share of the debt, a higher interest rate will tend to hit that group hardest. But the point that investing in a higher threshold or a shorter write-off period will benefit future lower earners most remains one worth taking seriously.
How does the Scottish version of the scheme compare, on those terms? It has in fact the least progressive combination of factors in the UK. Like Northern Ireland, Scotland has kept to a lower repayment threshold. But it also has the longest period before write-offs of any part of the UK (35 years). Meantime, again like NI, it involves the highest interest rate subsidy. The effects of this are shown in some modelling produced by the Scottish Parliament Information Centre SP13-78, which demonstrated that at the moment at lowest two earnings deciles, a Scottish graduate borrowing £16,000 will end up paying back more than an English student who borrowed £36,000.
That happens because, for example, at an income of £20,000 the Scottish graduate is paying back just over £20 pcm (9% of earnings over £16,910, over 12 months) and the English one £0 (because they are earning below their higher threshold, of £21,000). At £25,000 the Scottish student is paying around £60 pcm: the English one around £30 pcm (9% of earnings over £21,000, over 12 months). Combined with a faster write-off, a low-earning English graduate is therefore more sheltered from repayment.
Moving to a higher threshold and/or writing off loans sooner – as in the Plan 2 loan scheme – would be more progressive. Both would put up the cost of the scheme. However, as noted here, there is plenty of room in the RAB charge assigned to Scotland to absorb some extra cost. It’s hard to estimate what would be the effect on the RAB of a higher threshold or a shorter write-off period: but at first sight these things ought to be affordable.
As far the technical issues go, the Scottish Government ought to be able to choose to move to the threshold for Plan 2. Shortening the write-off period also ought to be fully within its gift.
The interest rate would also simply be a matter for it to negotiate with the Student Loans Company. On Barr’s arguments, there would also be a case for looking again at the relatively high interest rate subsidy, to counter-balance the cost of other changes, but perhaps not until we have sorted out the regressive underlying distribution of debt. Noting that higher interest rates are used in some other countries, including Sweden, Barr offers various alternative models to the current interest rate arrangements.
Addressing Scotland’s unusually regressive graduate debt distribution would involve finding cash funds for student grants on a scale it is hard to see materialising any time soon.
But non-cash resources appear to be available now which could be used to improve the protection for low earners in the Scottish version of the student loan scheme. It would at least be good to know what it would cost to do that.
Scotland is not wholly exempt from engaging with the bigger debate about the long-term effects on public finances of using student loans, how much reliance can safely be put on the system without storing up significant problems for the future and how loans subsidies for full-time students in higher education should be prioritised over other types of spend. England, it might be said, is stress testing that model right now. The devolved administrations have been more cautious, but unable to ignore entirely the way loans help plug immediate gaps in their budgets. At the level of the overall budget, making a bit more use of student loan looks like reasonable choice in Scotland, Wales and Northern Ireland (even if the way we have chosen to distribute that debt in Scotland is problematic). But that’s no reason to avoid subjecting our own use of student loans to a bit of critical scrutiny.
The cost of student loans is captured in the budget as the RAB charge (some background to that here).
The RAB charge is a calculation of how much of the loan being issued is expect to go unpaid and the cost of charging an interest rate which is below the cost of government borrowing. It is derived from a complex model, which requires estimates of the distribution and life-time pattern of graduate earnings. Outside government, it is very difficult to estimate how certain changes in the loan scheme or the wider world might affect the RAB charge, although London Economics (see this briefing published on 12 March, for example) has a model which has been drawn on by bodies such as the IPPR.
The figures at pages 128 to 144 to of this IPPR report consider the RAB implications of possible changes to the loans scheme in England and are based on the London Economics model. They would not apply in exactly the same way in Scotland, but do give a feel for how the RAB responds to particular changes to the loan scheme.
There are 2 student loan schemes in operation at present. Plan 1 is the old one, still used for new students from Scotland and Northern Ireland. Plan 2 has applied to new students from England and Wales since 2012.
The government has no (direct, at least) control over graduate earnings. The things within government control which affect the cost of loans are:
- the interest rate subsidy (higher under Plan 1 than Plan 2)
- the earnings threshold repayment (£16,910 from April 2014 in Plan 1, £21,000 in Plan 2)
- the percentage rate applied to earnings over the threshold (9% in both)
- how quickly the government writes of the debt (after 25 years in Plan 1 for rUK students, 35 years in Plan 1 for Scottish students, 30 years in Plan 2; or at 65 in all cases, if sooner)
- how large a debt individuals are expected to carry and therefore how likely it is – when combined with the factors above and estimates of graduate earnings – that the whole amount will be be repaid (the sums are much higher in England than in the devolved administrations)
It is easy to forget that student loans are themselves a significantly subsidised form of funding. So much so, that the IPPR estimates that in England, even with the switch to much higher fee contributions, graduates as a whole will only be covering a minority of their teaching cost. This is because so much loan in England will eventually go un-repaid. The IPPR report contains some useful tables which bring out that women, in particular, are much less likely than men to earn enough to repay the scale of debt now commonly expected under the post-2012 arrangements. There is indeed a debate going on south of the border about how to reduce the cost of the loan scheme and so free up more public funding for additional opportunities to study, particularly in forms which are less expensive than what is sometimes described as “the traditional boarding school model”.
The issues are a bit different in the devolved administrations, where lower levels of debt are expected and so students are far more likely to have repay most or all their debt, even if they are relatively low earners. This is an important point. It means that headline student debt is much more “real” in Scotland than England. Aware of the debate in England, someone suggested to me recently that unequal debt distribution in Scotland isn’t a problem, as the debt is anyway unlikely to be repaid. But that is not so. In Scotland, the sums at stake for students from low-income backgrounds – in the £20,000 to £30,000 range for degree students, less for HN students on shorter courses – are high enough to make a serious dent in future take-home pay, but low enough to mean that most graduates can be expected to repay most or all of the debt, particularly when combined with the more stringent repayment rules applying to Scots under Plan 1.
This post sets out how student loans are treated in terms of public spending.
The government borrows on the gilts market to generate the money needed for student loans. The borrowing does not count against the deficit, because the government expects to recoup the funds from graduates in future (explained well in the student funding section of this IPPR report). The UK government passes the proceeds of this borrowing on to the Student Loans Company as grant-in-aid. The SLC then issues this money as loans to students.
These transactions all bypass the conventional government cash budget. Loans therefore do not count as normal public spending and offer governments (in all parts of the UK) a useful way of taking pressure off their cash budget. The net spending on loans is recorded in the books, but as capital Annually Managed Expenditure (AME).
Each government (UK for English-domiciled students, the devolved administrations for Scottish, Welsh and Northern Irish students) must however score in its accounts a “Resource Accounting and Budgeting” (RAB) charge, a form of impairment charge, for all the loan it issues. The RAB charge is a way of representing how much of the loan will never be repaid and the cost of the interest rate subsidy. In Scotland the RAB charge has most recently been publicly quoted as 31% of the face value of loans. In England, the value of the RAB charge was 34% but this has been contested, with some commentators suggesting that the right figure under the new arrangements should be at least 40% or even nearer 50%.
At UK level, the RAB charge’s precise place in public accounting is complex to follow (hence this piece from a senior fellow at the IPPR). Although the RAB charge does not score against cash spending, it is controlled. The Treasury determines, in effect, how much long-term non-payment risk it is prepared to carry on the books. Moreover, the RAB can still have implications for the cash budget. So the Department of Business and Industry could not suddenly decide to issue a lot more loan or make the scheme more expensive to run, unless they were prepared to give up cash. Indeed, the IPPR suggests that if the RAB charge turns out to have been set be too low in England, due to over-optimistic repayment assumptions, BIS will need to make cash savings so that it can increase the impairment charge for loans. Andrew McGettigan has similarly argued that setting the RAB too low now will increase the budget pressures in a few years’ time, raising issues of inter-generational equity.
The position is, for now at least, a bit more simple in Scotland. Here the Scottish Government is simply assigned a figure as its portion of RAB charge under the Barnett formula, even if that is more than its planned lending justifies. There’s no direct quid-pro-quo loss in the Scottish Block as the RAB rises. Indirectly, though, the rising RAB is a sign that the cash budget for teaching HE in England is falling, which is feeding through into reductions in the Scottish Block.
Because loans are used less extensively here, the RAB figure in effect is acting as a high ceiling. If England reduced its use of loans substantially, there could in theory be a problem with a too-low RAB figure – but it that does not look particularly likely. Instead, as noted here, Scotland has more than enough RAB for its current needs, and then some.
The next post on this will look at why the RAB charge rises or falls and the implications of that for policy-making in Scotland.
Given that in Scotland we are planning to rely more and more on student loans to finance our higher education system, we don’t talk about them much and it’s not clear that we understand them very well.
There is by contrast a lively critical debate underway elsewhere in the UK about the implications of the growing use of student loans. Andrew McGettigan has written some powerful stuff about the long-term issues stacking up down south as a result of the scale of debt being built into the system. Nicholas Barr at the LSE has written about how the detailed design of the loan scheme can make it more or less regressive. HEPI has also been active on this subject. Sometimes the commentators disagree on some pretty fundamental points: see for examples this response by the IPPR to criticisms by McGettigan of a report containing a very detailed analysis of the role of student loans.
I’ve written largely about how policy on Scotland is generating a regressive distribution of graduate debt. This post and a few more to follow will draw on the work above to look at the student loan system more generally, because here in Scotland we too should be discussing the big issues round student loans.
Although the most recent budget for Scotland didn’t suggest that we will be moving to English levels of overall borrowing in the near future, it did confirm that by 2015-16, over 80% of our support for students’ living costs will be provided through student loans. In that year net loans advanced will have risen to £468m (from £241m in 2012-13), driven by a substantial (-30%) withdrawal from the use of student grants and a reliance entirely on loan to provide improved living cost support, as explained in more detail here. Even once all the funding provided for HE in universities and colleges by the Scottish Funding Council is included, student loans will still account for around one-quarter of the total funding provided by the Scottish Government to higher education.
Nor is it clear how far the net loans figure is acting in the budget as a proxy for gross loans – ie the actual total value of new loans being issued, before taking account of repayments from earlier cohorts from students. If gross loans are in fact expected to be higher, then in terms of gross outlay, all the percentages above will be higher too.
In this post I noted the especially sharp rise planned for the Resource Accounting and Budgeting (RAB) charge for student loans in 2015-16 and wondered if more about this would emerge in the process of budget scrutiny. Surprisingly perhaps, nothing did, leaving it unclear what is driving this. However, looking at the scale of borrowing planned in England, it is plausible this is simply the Barnett consequential. Assuming so, that gives the Scottish Government the power to issue far more loan under the terms of the current scheme than on any measure it will conceivably need to do. At a RAB rate of 31% (the latest we know of) £302.1m of RAB charge could generate nearly £1bn in loans, or double the net loans budgeted for next year.
Does this matter? It does, because it gives the Scottish Government headroom to look at the detail of the loan scheme and deal with some of the ways in which the scheme available to Scottish (and also Northern Irish) students bears down harder on low earners than one now used for England and Wales. In particular, in Scotland debts of around £25,000 to £30,000 will only be found among degree students from poorer backgrounds, while many better-off students will have much lower debt than that. So we will be let off one of the largest problems in England. That is, that many of their graduates will have student loan debts of over £30,000 plus (plus), which will simply be too large to collect under the current terms of the income contingent loan scheme, stacking up problems for the future.
Under the current arrangements, there is room in Scotland to use student loan more intelligently and fairly, while continuing to benefit from the way in which loans stretch out the resources available to government to fund the higher education system, but avoiding the worst effects of the decision in England to rely so heavily on loans.
A few more posts on this to follow.
I recently completed The Fairest of Them All?, a Working Paper for the Centre for Research in Education Inclusion and Diversity at the University of Edinburgh, updating my earlier report on student funding.
The report is also available on the CREID website, along with a number of other useful publications covering widening access and cross-border student flows, among other things. These papers have all been produced as part of the Higher Education in Scotland, the Devolution Settlement and the Referendum on Independence project, funded by the ESRC.
In summary, the report finds as before that the Scottish system offers similar levels of overall debt at lower incomes as the other devolved administrations and is only clearly relatively advantageous to those from higher income backgrounds. It notes that Scotland is an unexceptional and sometimes relatively poor performer on spending power for students who live away from home, though comparatively good for those who are able to live with their parents while they study. It includes far more analysis than before of the actual distribution of student loan debt in Scotland and the impact of recent policies on debt distribution, confirming that there has been a general trend in recent years towards increasing debt most for those from the poorest homes. I will be blogging more about all of that.
Prompted by the current debate on Scottish independence, the Scottish Parliament’s Education and Culture Committee is currently holding an inquiry into Scotland’s educational and cultural future.
Its questions on higher education focus on the themes covered in most detail in the recent White Paper ie rUK student fees, research and international students.
My evidence EC evidence March 2014 to the inquiry suggests there are a number of issues raised by student support in which it would be useful for the Committee to take an interest, in particular the future portability of student support around the UK, what residence tests would apply and issues affecting student loans. The Committee has also asked for issues to consider for the future regardless of the outcome of September’s referendum. In that context, I have highlighted the current skewing of student loans towards those from lower-income backgrounds as an issue requiring reform.
All the evidence submitted to the Committee and details of its hearings will be available at the link above. The oral evidence session on higher and further education is planned for 25 March.
This post provides additional data for this piece, published on the blog of Economics of Higher Education Network.
figure 1 provides the budgeted student loan figures for Scotland between 2003-04 and 2014-15
figure 2 shows the percentage shares of student loan as against the share of the total population of students receiving some form of government support, in the best available published income categories
figure 3 shows how this translates into average debt for borrowers in each category
figure 4 shows the proportion of students taking out a loan in each category, with an indication of how far the number of those not taking out a loan may be explained by the number of students in each category who are not permitted to do so. (Note: updated on 13/12/13, to reflect that I had suggested that part-time students might account for some of non-loan takers at lower incomes, but have now been able to establish from the SG that the published data already excludes these).
The article notes that debt take up is more evenly spread in jurisdictions with fees and higher grants. This draws on two main sources. Statistics produced by the Student Loans Company show that the take-up of tuition fee loans in both Wales and England is well over 80%. A higher percentage of students also also take out living cost loans. Although more detailed data is not published on income distribution, it is arithmetically impossible for this not to produce a more event spread of debt than in Scotland, particularly once combined with the way higher grant reduces living cost debt at lower incomes, as already analysed here. [Update: figures since provided by the SLC confirm that debt is far more evenly spread across the income range in other parts of the UK – see later post here.]
Last of all, this chart Debt by income, which is more of a work in progress, estimates how actual borrowing was distributed across the whole student population, including non-borrowers and those who did not apply for any means-tested support, and compares that with the published averages for borrowers who have declared an income and the entitlement to loan at different incomes in 2012-13. It involves making quite a few assumptions and estimates and I’ll post more about that shortly. However, it is based on what ought to be a good enough working model. Averages are plotted at the mid-point for an income range and trend-lines have been added.
This last chart provides an indication of how in practice, the distribution of new student loan debt in Scotland last year was more skewed towards poorer students than suggested either by entitlements in theory or the data available on borrowing by income. How this pattern has been changed by the new arrangements in place from this year will not be known until next autumn. On this model we might expect that borrowing will rise noticeably on the left-hand side of the chart, may lift a little in the middle with the introduction of a higher minimum loan for those with incomes from the mid £30,000’s, but is likely to remain low at the right-hand side, even though this group will be offered the chance to borrow much more.
There is more material on the pattern of borrowing in Scotland and influences on it in this post.
Disabled Students Allowance is a non-means-tested grant which exists to provide extra financial help for students who have a disability, ongoing health condition, mental health condition or a learning difficulty. It is managed centrally by SAAS and is currently under review. A look at the most recent spending data for DSA and the position in other parts of the UK adds to the picture of grant playing a diminishing role in student support in Scotland in recent years, in absolute terms and relative to other jurisdictions. The outcome of the review will be worth watching with that in mind.
DSA as a proportion of grant spend
DSA is the single largest block of grant spending after the Young and Independent Students Bursaries. It is much smaller than either, but as YSB and ISB decline in value DSA accounts for a growing share of the remaining grant budget. In 2012-13 it was worth 7.5% of total spending on non-repayable grants: see here Grant shares. Next year, if spending on DSA stays the same in real terms, it will be worth around 10.5% of the total: if it returns to its higher 2011-12 level, it will be around 13%. How much is spent on DSA is therefore becoming an increasingly significant issue in relation to the grant budget as a whole.
Patterns of spending on DSA in Scotland
Spending on DSA rose by 80% in real terms between 2001-02 and 2008-09 – see DSA spend and claims (figures all shown at current prices). It then began to fall. The chart also shows how claimant numbers rose up to 2011-12 and then fell for the first time in 2012-13. It also shows that the average value of a DSA award has fallen steadily over the period, almost halving in real terms between 2001-02 and 2012-13. In particular, between 2010-11 and 2012-13 spending on DSA (excluding a new element for travel grants – see below) fell by 21% in real terms.
The chart takes into account the transfer of travel grants for disabled students into DSA from the now defunct system of general travel grants, from 2011-12. This represents a significant amount of new spending under this heading (over £0.574m in 2012-13). The government is unable to provide the equivalent figure for 2011-12, so the numbers for that year cannot be securely included in a like-for-like comparison of spending between years: the chart shows what the position would have been if the same spending on travel grant as reported for 2012-13 applied (the overall total shown for the year is correct).
From these charts (figures 4 and 5) in the official statistical publication the decline in applicants appears to be due to a fall in the number citing dyslexia. Figures for all other disabilities in total remained steady. Spending however fell for both groups.
The official statistical publication states: “SAAS‘s policy on DSA support in 2012-13 is similar to 2011-12 policy (although there were some minor changes to the existing policies as part of ongoing efforts to improve procedures on DSA payments). However, there are still a number of factors that may have had an impact on the decrease in number of students and payments made through DSA. For example, improvements in technology may mean that equipment costs less than previous years, and as institutions improve services for their students, this may mean that fewer students require support from the DSA.”
UK comparisons
If one explanation is improvements in technology, and changes in what institutions provide to students, a similar fall in DSA spending and claims might be expected to be seen elsewhere. DSA was a well-established part of student support prior to devolution and exists in all parts of the UK. Technological developments, and even changes in institutional practice, will not only affect Scotland.
Figures for DSA spending and claims in England, Wales and Northern Ireland were recently published up to 2012-13 by the Student Loans Company. Claimants have risen in England, Wales and Northern Ireland since 2009-10 (the first year covered in the most recent SLC publication). Spending also rose in all three other jurisdictions over the same period, rising by between 13% and 28% in real terms, despite slight dips in England and Northern Ireland in 2012-13. The Scottish fall in applicants and spending over the same period is very distinctive. See here: DSA UK comps
A comparison of the average value of a claim shows that between 2009-10 and 2012-13 it rose in real terms by 1% in Wales, fell by 3% in England and by 23% in Scotland. The average fell by 21*% in Northern Ireland compared to 2009-10*. Although the averages for Northern Ireland and Scotland were the same, the average value of a DSA claim in Scotland was 64%* of the figure for Wales and 72*% of that in England in 2012-13, a much wider gap than in 2009-10. (*Figures updated from original post, to give fall in NI since 2009-10, and correct 70% and 80% previously provided incorrectly for Welsh and English comparisons)
Total spending on DSA was also higher in England and Wales (though not Northern Ireland) when looked at per head of the total population of full-time state-supported students: see the table below. The proportion of all students claiming was also higher in England and Wales. Technical differences in how students are counted cannot be enough to account for the difference. The spending figures for Scotland in 2012-13 were also well below what would be expected based simply on the Barnett formula.
| Scotland | England | Wales | NI | |
| Total full-time students 2012-131 | 128,000 | 1,038,800 | 54,300 | 45,800 |
| Spend on DSA (£’000) | 7,487 | 119,900 | 7,600 | 2,900 |
| Spending per head (all full-time students) (£) | 58 | 115 | 140 | 65 |
| % full-time students claiming DSA | 3.1% | 5.3% | 5.7% | 3.3% |
1 As published by SLC for England, Wales and Northern Ireland in November 2013. SAAS does not publish a figure for full-time students: figure obtained by removing the number of students declared as receiving part-time support from the total of 135,375.
The SLC notes that its 2012-13 figures are still provisional, because claims for any year can be submitted well after the year end. So the 2012-13 figures for England, Wales or Northern Ireland may still rise. The data published by SAAS does not include the same caveat. Past statistical documents show no history of later revisions to Scottish figures published for a particular year.
There may of course be other differences in the nature of schemes which could explain the higher general spending on DSA in England and Wales which a closer examination would reveal. But it would still be the case that by last year DSA represented a significantly more substantial source of non-repayable support, and for a larger proportion of students, in England and Wales than it did in Scotland.
The current review of DSA in Scotland
In June the Scottish Government issued a consultation paper which noted that:
“In accounting terms, there is a disconnect between [the] professional assessments and the budget that supports the scheme. After assessments are carried out, recommendations are submitted to SAAS who hold the budget for the scheme and have ultimate responsibility on spend. This consultation is being undertaken to explore the possibility of bringing budget responsibility closer to those who are tasked with making the assessments. All of what follows is predicated on the assumption that from the student perspective, there would be no apparent change in service delivery apart from faster turnarounds following assessment.”
Responses to the paper were published on 31 October and are mixed, with some supporting and others opposed to the move. The government response has not yet been made.
Around half the text providing introductory background to the proposal concentrates on the rise in spending up to 2011-12. That implies that this is seen as a particularly relevant piece of context for the review, even if the document does not suggest that there are any plans to reduce the amount spent. It says:
“The number of students in receipt of DSA is increasing. In 2011-2012, 4,495 students received DSA; this is 120% higher than in 2002-2003 and 1.35% higher than in 2010-2011.
The amount paid out through DSA has increased by 75% since 2002-2003 to £9.022 million in 2011-2012. [Note: this is in cash rather than real terms and includes the shift of travel grants into DSA. The real terms like-for-like increase over the same period was 32%; by 2012-13, it was 6% – roughly in line with the growth in general student numbers. The 2012-13 figures were not publicly available until October 2013.]
The cost of providing support through DSA has been increasing without any corresponding evidence that the number of disabled people within the general population is increasing or that this growth pattern mirrors improvements in diagnostic techniques [Note: while the level of disability in the general population is mentioned, the possibility is not considered that more disabled students are making it through the education system with good enough qualifications for HE, perhaps partly as a result of the long-term effects of the Disability Discrimination Act 1995]. The number of students qualifying has more than doubled between 2002 and 2012 and is still going up [Note: as seen, the trend change in 2012-13] In large part, this increase is explained by the numbers of students diagnosed with dyslexia.”
The issues raised by devolving budgets
Devolving budgets would raise the issue of how far DSA remained entirely demand-led rather than cash-limited for all or some types of claims. The consultation paper does not discuss this at length but, recognising that budgets would have to be set for institutions in advance, does note:
“We have a lot of evidence in terms of historical spend, but future spend predictions are obviously more difficult. Any system of budget allocation would need to be flexible enough such that support could be provided for the unexpected or the exceptional” and “there would need to be some flexibility in recognition that budgets set in advance could not take account of exceptional demands”.
It asks:
“What sort of safety net would be required in order to support institutions dealing with exceptional cases? e.g. A scheme developed along the lines of Discretionary Fund allocations with in-year re-distributions? Retention of a top-slice by SAAS with a view to further demand-led allocations?”
Special arrangements for unforeseeably complex or expensive cases would surely be unavoidable here. The more difficult day-to-day question is how devolved budgets would interact with an unexpected higher demand from unexceptional cases, as happened with the rise in claims for dyslexia over the first decade of the century. Further, the reference to “top-slicing” an element of the budget for SAAS leaves unclear whether the total DSA budget would become a fixed amount each year or whether the element retained by SAAS would remain completely open-ended.
If the decision is taken to proceed with a system of devolved budgets it will be technically challenging to couple that with maintaining the current completely open-ended spending arrangements. Even if there is a central top-up pot, devolved budgets usually come with incentives not to over-spend locally, inducing prudential caution in those making decisions on the ground. Indeed, some might doubtless argue that that would be an advantage of a different approach.
In that case, however, there should be honesty about the implications for individuals of the move from a system where every student’s claim is currently assessed purely on need to one where the availability of resources managed locally will form part of the decision. It may not mean a worse system: it might prove better for some. But fundamentally it would be a system where the government would be in a stronger position than it is now to control the overall level of spending, at the expense of those who would otherwise have benefitted from more or higher awards being made. Given the recent reductions in YSB and ISB, such a development would become part of a larger story about a less generous line on grants in Scotland.
Relevance of the 2012-13 spending figures to the current review
A decision to devolve budgets would also require a decision about how much to devolve. The consultation paper does not discuss this, but transfers of financial responsibility between public bodies are usually based on recent spending patterns. That raises the interesting question of how the unusually low – in recent terms – 2012-13 spending figures will be taken into account. The figures for 2013-14 will not be known for some time.
It would certainly make sense to understand what drove the fall in spending in 2012-13, before its effect – and a rate of spending now well below the UK average – is potentially cemented into the system for the long-term. Given that even a second year of lower spending would be unusual in recent terms, there would be a strong case for arguing that any system of budget devolution needs to have an in-built recognition from the start that spending in 2012-13 was unusually low by recent Scottish standards, and exceptionally low in UK terms.
Even if there is no change to the current arrangements, understanding better the fall in 2012-13, particularly if it is sustained or even repeated again in 2013-14, would make sense, as part of monitoring the ability of the system to support wider access in the widest sense.
The Guardian reported on 23 November (“Poorest students face £350m cut in grants”) that grants may be cut in England, based on sight of a leaked UK Government document. The Evening Standard then covered the Guardian story.
The report suggests that after the next election (ie in 2015) grants for the poorest could be cut by £1000 – with that amount being replaced by extra loan – and the upper threshold for grant entitlement reduced from £42,000 to around £35,000.
The report notes: “Toni Pearce, president of the National Union of Students, said the plans were “outrageous”. She said: “Any proposal to balance the books on the backs of the poorest students would be disgraceful.””
It’s worth noting that:
- the possible policy for which the UK Government is being criticised in relation to means-tested grants is very similar to what has already been implemented by the Scottish Government. This year the SG has reduced maximum grants by £890, but also dropped the threshold for maximum grants and introduced a sharp downwards step in entitlement at that point, resulting in losses of over £1500 for some low-income students students. Grant has been replaced by loan in exactly the same way as proposed in the leaked report.
- the reaction of student leaders has been significantly different in each case. In Scotland in 2012, grant reductions were accepted not only without criticism, but without comment, as part of a wider package of changes which received strong NUS support: the issue of greater indebtedness for poorer students was not regarded as salient, and loan and grant discussed as though they were effectively interchangeable.
- the maximum grants and upper threshold for any grant in England would still be higher than in Scotland, if these changes applied. Mature students in England would still have a much more generous grant regime. It is not clear if there are also plans to bring down the threshold at which maximum grant would apply: if not, this will remain substantially higher in England.
- the proposals are described as still subject to high-level political discussion, suggesting that the grant-loan switch is regarded as politically sensitive by the UK government.
The contrast in the reporting of the Scottish actual and English possible policies is thought-provoking.
First, the Guardian’s own coverage last year of the Scottish changes – which included exactly the same grant-loan switch – was wholly complimentary. However, the way in which that package was presented to the press meant that the grant cuts were completely invisible. The contrast between two stories in the same paper dealing with fundamentally the same thing brings out how central were the non-transparent terms of the Scottish announcement, and the support of the NUS, to obtaining immediate positive coverage for the Scottish Government’s announcement. Being able to contrast the two Guardian stories provides a fascinating case study of media management in contemporary Scotland.
Also, the leaked UK document deals with other aspects of higher education funding, but it is the potential impact on low-income students which has been selected as the headline. By contrast, even once actual grant cuts in Scotland became apparent and concerns were raised by the opposition parties last autumn, there was little coverage (and none at all on the BBC or in The Herald: the latter has only acknowledged the issue very recently, the former still not at all, as far as I can tell).
Today’s report raises the interesting question of why a reluctance in the heavy-weight media to cover changes which are only detrimental to poorer students should be such a distinctively Scottish phenomenon, when the rhetoric of Scottish politics in general, and around higher education in particular, is so strongly identified with the idea of social justice.
Drawing on recently published figures, posts here, here and here on this site provide data on the increased reliance on student loans to provide student support in Scotland, the general trends in the use of grants and how the principal means-tested grant, the Young Student Bursary, was already eroding prior to the large reductions applied to it this year. Pulling these together, this post argues the case for much greater transparency and debate about these trends, and a debate on different terms from the one which dominates in Scottish politics.
Student grants
The law does not require the annual rates for student grants to be announced or scrutinised in the Parliament. None of the relevant government news releases and budget documents I have so far been able to find brought out how the Young Students Bursary, in particular, was being affected by decisions to reduce investment in grants.
For those not able to follow the decision-making process closely, the fact that YSB was being frozen from 2010-11 would therefore have been obscure, unless they went out of their way to do cross-year comparisons on the SAAS website (and indeed this was exactly how the 2013-14 reductions first came to light in the autumn of 2012).
It cannot have helped that many of the most articulate and confident members of Scottish society, at least when it comes to taking part in high-profile public debate, are unaffected by changes to the grant system, while the families who most feel the effects of freezes and reductions in grant have little direct access to platforms in the media.
Student loan debt
A large increase in the use of loan is being embedded in the student support system without a clear explanation by the government to the wider community about the scale on which this is happening and its long-term effects, and without a debate about how that debt should be distributed between students.
The increased use of loans for living costs in Scotland has been presented by the Scottish Government as a pure public good, strongly framed in terms of increased support and improvements in what is available – see for example this recent press release. The headline figures quoted there do not distinguish between loans and grants: loans are the major component.
The NUS – focussed on hardship and spending power, and the maintenance of free tuition – has largely supported that point of view – see here, for example, although there are signs that it has a growing interest in the issue of grants for those at lower incomes. In its recent evidence on the Scottish Budget it notes: “While NUS Scotland has been extremely supportive of the Scottish Government’s simplification of student support, and the creation – as we had long called for – of a significantly improved settlement for the poorest students, we would be keen to see how [further] increases could be achieved through bursaries, as opposed to further loan increases. This would particularly be the case for the bottom two income brackets at least.”
There is almost certainly a higher awareness in Scotland of the debt faced by English students, than of the fact that in a few years’ time Scottish students collectively are expected to incur around 3 times as much debt as before. The maximum English fee is a far more well-known figure in Scotland, than the £1000 to £2000 (per year of study) that young Scottish honours graduates who started from the most low-income homes will typically need to find from their future earnings, as a result of borrowing more to make up for reductions in means-tested grants. It is doubtful there is much awareness that, within the UK at least, only in Scotland are students from low-income homes being asked to pay largest de facto “graduate tax” on their future earnings.
Getting a more progressive debate
The extra costs graduates from low-income homes will have to bear in future will be directly due to a failure to afford cash for grants the same protection as cash for tuition fee support at a time when budgets were under pressure. Loans deemed unacceptable for fees have been embraced as an unproblematic substitute for state support for living costs – and the scale and distribution of that growing debt remains largely obscure to the wider public.
This debate is sometimes treated as an unavoidable choice between prioritising tuition fees or grants. That’s an artificial dilemma we choose for ourselves. If our aim is to contain individual debt within reasonable levels and distribute what debt cannot be avoided in a fair way, then state subsidies for tuition and for living cost support for the poorest should be treated as equally important. If one is protected, so should the other be. If one has to take cuts, or be replaced in part by loan, so should the other – and always in a way which looks at the the net effect of all changes on students from particular backgrounds.
The alternative, as the data already emerging shows, is for the government debt underpinning the higher education system – which looks here to stay – to become increasingly visited on one section of the student population, within which students from the poorest homes will be over-represented.
This post provides summaries in the form of graphs for SAAS spending and claimant numbers for various forms of grant, based on the most recent statistical bulletin, which provides figures from 2003-04 to 2012-13. Spending data has been converted from the cash figures published to current (ie 2013-14) prices.
The table also projects SAAS grant spending forward to 2013-14, on the best currently available data. The 2013-14 figures are derived from data supplied separately to the Scottish Parliament by the Scottish Government last year. This is not an ideal data set to use, but is the only official estimate provided to date for spending in the current year.
Grant Spending
This graph – Award payments and total amount paid by SAAS – shows how spending on non-repayable forms of student support has changed over the years.
The graph shows significant ups and downs over the period, and the downward trend from 2011-12 onwards.
The notes to the full SAAS statistical document provide more detail on what was changing within the system over the period. However, in brief, the larger changes accounting for rises and falls in the total line and its component parts are:
- From 2004-05, Dependents Grant could no longer be claimed for children and the School Meals Grant (included here in “Other”) was abolished, with the introduction of Child Tax Credit.
- In 2005-06 the income threshold for YSB was raised, and the rate went up faster than inflation: as a result, more money could be claimed by more people
- Independent Students Grant was introduced in 2010-11, creating a significant new element of grant spending. It was initially worth £17m at current prices
- In 2010-11, around £3.5m of support to postgraduates was removed from the system – I have not yet found any background to this. (The Scottish Government recently announced additional loans for postgraduates, from 2014-15.)
- Travel grants were removed in 2011-12. The budgeted reduction in the grant line was around £14m, although in practice they were worth just over £21m at current prices in their final year. Around half the funds saved appear to have been used to obtain more loan for those at lower incomes. None of the remaining grant seems to have been re-applied as grant elsewhere in the system. From 2011-12 onwards, Disabled Student Allowance travel expenses were absorbed into the DSA totals, and allied health professions and study abroad travel expenses into ad hoc payments (shown here within “Other”)
- Childcare grants were transferred from SAAS to institutions in 2011-12, removing the Lone Parents Childcare Grant, worth £1.5m in its final year, from these figures.
- The freezing of YSB rates from 2010-11 probably almost certainly accounts for much of the fall in real terms spending on that grant over the period immediately prior to 2013-14.
- The separate bursaries for students outside Scotland and certain “allied health professions” were incorporated into the YSB and ISB from 2013-14. all These 2 grant streams together accounted for around £5m in 2012-13. It is not possible to estimate how much will be spent on students previously in these groups, as of 2013-14. NB The table assumes all of the £2.7m spent on health bursaries will be absorbed into YSB/ISB, but that may not be right.
- The rates and thresholds for YSB and ISB were significantly reduced from 2013-14, accounting for the large fall in estimated YSB spending, in particular.
Numbers claiming
SAAS awards are demand led. Year on year changes can therefore be partly explained by changes in numbers of applicants and their profile.
This table – Numbers of students receiving awards from SAAS – provides an overview of how numbers claiming each grant changed over the period.
Note that these are claimants for each form of grant – some students will have been able to claim more than one grant and will have done so.
The large number affected by the removal of travel grants stands out.
The relatively stable number claiming YSB up to 2012-13, after the rule change took effect in 2005-06, shows clearly. From that year up to 2012-13 claimants undulated between 33,000 and 35,000 a year.
Also noticeable is the large rise assumed in 2013-14 figure supplied by the Scottish Government to the Scottish Parliament for expected YSB claimants. This represents a 20 to 30% increase compared to the figures for the previous 7 years. The estimate given was 41,935, compared to actual YSB claimants in 2012-13 of 33,140. Up to 3,000 students will be transferring to YSB from health department and outside Scotland grants schemes. However, other reasons for the expected rapid growth in YSB claimants are not immediately clear, from changes either to the scheme or the wider environment. The estimated figures for applicants (and therefore probably also spending) therefore need a caveat that they appear to be on the high side. The actual figures will not be available until next year.
In April 2013, the Scottish Government laid before the Parliament its Fifth Annual Widening Access Report (5th annual report), produced to comply with Section 4(1)(b) of the Graduate Endowment Abolition (Scotland) Act 2008. It appears to be the last such report required by the Act.
Reports under Section 4 must assess the impact of the abolition of the endowment on widening access to higher education and must include information on the proportion of Scottish domiciled entrants to higher education from the most deprived areas of Scotland.
The report is therefore mainly concerned with data on participation. However, it also contains interesting material on student support and student debt. This post concentrates on that element.
Debt and access
This is an unusual document, because it is an exceptional example of the Scottish Government acknowledging the importance of looking at debt in general, rather than fee debt in isolation. It also recognises that fee regimes (as in England and elsewhere in the OECD) need not reduce access to higher education, provided that for those from lower incomes, fees are accompanied by public subsidies, through grants and loans. These are both significant departures from the sort of arguments generally used by Ministers in Scotland.
Specifically, the report includes these comments (my emphasis added):
“19. When asked about fees, costs and the Graduate Endowment Fee in 2007-08 students said that costs for books/ equipment, rent/ housing, food/drink, entertainment, travel, and commercial loans were of greater concern to students than the Graduate Endowment Fees. This suggests, as noted in previous reports laid in Parliament, that while the Fee could have been a factor in a student’s decision to study at the time, it would be more accurate to consider the Fee in the wider context of costs and debt generally, and how both the fear of, and actual debt, impacts on student behaviour and outcomes. …
21 Other evidence sources suggest that the fear of debt and cost of study can potentially dissuade prospective students to going to university. People from disadvantaged family backgrounds are especially vulnerable in this respect.
22. BIS research notes that most young people see debt as a normal part of life, but that those with the most negative attitudes to debt are among those least likely to apply to HE. It suggests that students from low income households see the costs of HE as a debt rather than an investment. Those from less privileged backgrounds were more likely to be concerned about debt, and those most averse to debt were among the less willing to participate in HE….
24. While research from BIS has shown that the tuition fees introduced in England in 2006-07 did not impact on participation levels (even by those from deprived backgrounds), they seemed to have an impact on people’s choices of where to study. The research showed that people from more deprived backgrounds tended to choose a university closer to home, often a less prestigious institution. As such those from disadvantaged backgrounds are at risk, unless counterbalancing policies (such as loans and grants) are available to them.
25. The OECD reports similar findings. In OECD countries where students are required to pay tuition fees, and can benefit from public subsidies, there are not lower levels of access to university-level education than the OECD average.”
Student support and debt
The report also outlines recent developments in student support. It begins by saying (my emphasis again):
“26. Recognition of the impact that debt and fear of debt have on young people entering HE is why this Government has taken a number of actions to tackle the issue of student debt. As well as abolishing the Graduate Endowment Fee, the Scottish Government introduced a number of new funding packages and made changes to support systems to assist students from 2008, including…”
It then proceeds to list the main changes to student support. However, it omits some highly relevant pieces of information, given the preamble on debt.
The report does not mention that means-tested grant for young people from low-incomes homes was frozen in value in real terms from 2010-11 onwards.
For 2011-12, it notes: “Replacing the travel grant available prior to 2011 with an increase in the ceiling of £350. This increased the cash available to students by £10m, and meant that most students ended up with more money in their pockets.”
The large amount removed from travel grants (around £14m in planned spend, with actual spend in their final year standing at £20m) was not reinvested in other forms of grant. Instead around half appears to have been used to pay for more student loan, with the remainder appearing to be lost from the student support system altogether. The “ceiling” referred to as being raised by £350 is the ceiling for loans, although strikingly that clarification is left out.
For 2013-14, the year in which debt levels for the poorest were raised significantly, as a result of a substantial reduction in grants, it says only:
“As part of the Post-16 Education Reform Programme, a new package of student support from academic year 2013-14 will be introduced which includes:
- An annual minimum income of £7,250, through a combination of bursaries and loans, for students with a family income of less than £17,000 ;
- All students, irrespective of circumstances, will be eligible for a non-means tested student loan of £4,500 a year; and
- Part-time students with a personal income of less than £25,000 will from 2013-14 receive the equivalent of full tuition fee support; based on the proportion of the course they are studying.”
It could reasonably be argued that, in this specific context, the limited way in which the 2013-14 package is described falls well short of providing a full and clear account to the Parliament of the impact of the changes. The reduction in means-tested grants in 2013-14 substantially increased student debt for those from lower-income homes. Yet paragraph 26 clearly and puzzingly seeks to claim that these changes (and others which reduced the value of grant support) were pursued specifically as part of an agenda to tackle student debt.
I have not yet found any government press release, PQ [note: see update below] or other parliamentary statement drawing attention to publication of the report and no media reports of its contents. The data on widening access might have been expected to be relevant to the consideration of the Post-16 Bill, under scrutiny at the time, and it is possible the Government drew the Committee’s attention to the report in the context of proceedings on that Bill.
The only on-line version I have so far been able to find is this cached pdf.
Update: The report was referred to in this PQ response from early May:
To ask the Scottish Government how many full-time students from the country’s most deprived areas, and who started their course over the last three years, would have been eligible to pay the graduate endowment fee.
The 5th report following the abolition of the Graduate Endowment was placed before Parliament on 4 April 2013.”
As already noted, very large amounts of student loan are being brought into the Scottish system to support student living costs. This post puts the recent budget figures into their longer term context and draws on recently-published data from SAAS covering the last decade.
Recent trends
- In 2009-10, the last year in which Young Students Bursary was increased roughly in line with inflation, SAAS data shows that students took out loans worth £192.7m (£211m at current prices).
- The budget that year for “student loans net new lending” was £132.7m (£145m at current prices). The budget figure is net of repayments made by graduates, so is lower than the total of actual new borrowing. This will be a main reason for the difference between this and the figure produced by SAAS.
- The budget for “student loans net new lending” in 2012-13 estimated was £241.3m (£247m at current prices). Actual new borrowing was £249.9m (£256m at current prices).
- The recently-published budget plans for “student loans net new lending” stand at £468.3m in 2014-15 (£459.6m at current prices) and the same again in 2015-16 (£451m at current prices). As in the past, expected actual borrowing can assumed to be higher.
The budget figures imply a tripling of expected “net new lending” by government to students in real terms between 2009-10 and 2015-16, from £145m to £451m, with lending set to double over the two years from 2012-13 to 2014-15.
Given that “net new lending” is lower than total new borrowing, by 2015-16 it appears likely that on current Scottish Government plans students will be taking out in the region of £0.5 billion in loans each year.
The longer term pattern
The first graph in this document Student loan graphs shows:
- the total amount of student loan taken out each year between 2003-04 and 2012-13. All figures are at current prices. The figure falls quite quickly from 2003-04 (an influential factor here was the phasing in of YSB for new students and a broadening of entitlements to YSB from 2005-06). It then rises again, until in 2012-13 total loan is at a similar level in real terms to 2004-05.
- a similar, but less steep, fall and rise in the average amount of loan taken out, with the 2012-13 figure again close to the one 10 years previously. The effect of the graduate endowment came and went over a small number of years mid-decade.
- a similar pattern when the total value of student loans taken out is divided by the total number of Scottish-domiciled students, including those who did not take out a loan – except that on this measure debt has stayed lower relative to 2003-04. The next graph shows why.
The second graph shows that a third of students took out no new debt in 2012-13, compared to a quarter ten years before. Some of the total population may have been ineligible for a loan. However, the possibility suggests itself from these figures that more students than before are now managing to avoid any debt, while the remainder are absorbing an increasing amount of debt. The 2013-14 figures, not availble until next year, will show what sort of impact the reductions in grant have had on this emerging gap betwen students with little or no debt, and the remaining part of the student population, on which rising levels of loan appear to be becoming concentrated.
Things to note
Not all this extra borrowing will fall on low-income students. The government has also increased the availability of loans for those at higher incomes and for post-graduates. However, as individuals low-income undergraduates will face the highest student loan levels, a situation unique to Scotland within the UK. In other jurisdictions, much greater use of maintenance grants for the poorer students and the need to borrow for fees at higher incomes produces the opposite effect: see the graph here.
A significant cause of this shift to loans is the Scottish settlement under the Barnett formula. Cash funding is under pressure, while there has been a large increase in the availability of loans. As this research briefing from the Scottish Parliament Information Centre (SPICe) explains: “Changes to the UK government’s policy on fees and loans led to a significant consequential uplift in the Scottish Government’s “Cost of providing student loans” DEL line. This enabled Scottish Ministers to introduce the minimum income commitment for Scottish students through increased access to student loans, focussing on improving access to maintenance loans rather than loans for fees.”
Prior to this increase, it could be argued that foregoing grant was worthwhile, as it paid for the release of additional loan, to meet the concern felt by many students about hardship and inadequate state support for immediate spending. How this thinking appears to have affected recent decisions on the Young Students Bursary in particular is considered further here. However, since student loans have become available in larger amounts through the Barnett formula, the case for giving up grant for higher, loan-supported spending power has been overtaken.
YSB dates from 2001-02 and is available to most Scottish-domiciled full-time students in HE who are under 25, subject to means-testing.
Value to students
YSB from 2001 shows the maximum amount which has been available over the period. The table gives the value both in cash and at current ie 2013-14 prices.
YSB increased close to, or even sometimes faster than, inflation in its first 9 years. Its real terms value peaked in 2005-06. Increases were very slightly below inflation for the next 4 years, but YSB still remained worth 99% of its 2005-06 value.
From 2010-11, grant levels were frozen. The table shows the effect on the value, again at 2013-14 prices, of the freeze. For those on the maximum rate, the freeze had a cumulative effect of reducing the real terms value of the grant by £184 a year by 2012-13.
YSB rates were significantly reduced in 2013-14.
Reaction to the initial freeze
The initial decision to implement a freeze was taken rapidly over the course of October 2009. The process underlying decisions for the 2010-11 academic year was explained by the then Cabinet Secretary for Education, Fiona Hyslop, in this statement to the Parliament on 28 October 2009.
A Scottish Government news release from early October 2009 had said: “The Scottish Government also plans to increase grants for the poorest students receiving the Young Students’ Bursary … Ms Hyslop is to meet opposition parties and student representatives during the next two weeks to agree the final level of increase in the grants for young students.” In response to that consultation, and an argument that hardship was a more important issue than debt, expressed by the NUS and supported by Opposition parties, the government converted grant to a larger amount of student loan. The final package included an additional £180 a year in loan for the poorest students, not previously envisaged.
At Committee, also on 28 October 2009, in response to questioning on the detail of the SAAS budget, Ms Hyslop said: “We should make you aware that we, like the UK Government, have put a freeze on some of what would normally be an uprating of the grants and bursaries that are provided”. Although the freeze was not referred to in those terms again, in a later statement to the Chamber, the Cabinet Secretary did mention: “a further increase in student loans, rather than through student grants … Although the strict terms of the motion that the Parliament passed on 21 May might not have been met, particularly the Opposition’s original wish to increase the young students bursary, the main element of it—addressing student hardship—has, I believe, been realised.” The decision seems to have been clearly understood by all the political parties.
This final package was reported in The Scotsman, with a separate new grant for independent students reported, but no mention of the plans for YSB, in line with this Scottish Government new release announcing the final package for 2010-11, which was also silent on the bursary decision.
And then…?
The further 2 years of YSB cash freeze, with loans used to deal with inflation-proofing, appear to have been uncontroversial. I have not been able to find any reporting of the decisions for either 2011-12 or 2012-13.
I have though not yet been able to find any formal press notice or parliamentary announcement of the decision to freeze YSB levels in later years. It is difficult to tell, therefore, how widely known it was that its value was declining in real terms.
The position argued for 2010-11 made sense: around £73 less grant in exchange for an additional £180 spending power met the NUS priority on hardship, with a limited impact on debt. At the same time, a new bursary for independent students had been introduced, going a fair way to deal with the exclusion of this group from the main scheme of maintenance grants.
The more difficult questions are:
- how far the debt impact on the poorest students could still be regarded as de minimis about after a further 2 years of freezes; and
- how far this period of uncontroversial grant freezes paved the way for the much larger reductions applied in 2013-14, with its unarguably significant impact on the indebtness of the students from the lowest income homes. As YSB from 2001 shows, with the freeze now announced for next year, by 2014-15 students from the poorest homes will be incurring £1168 more a year in debt, compared to 2009-10, due solely to lost grant and before further borrowing required to attain their full entitlement to Scottish Government support. A few low-income young students caught by tightening of grant thresholds will be £1900 a year worse off by next year. The continued freeze arguably allowed means-tested grants for poorer students in HE to become seen as a relatively low priority for the use of government cash and an easy place to make savings.
Since 2012-13 the Scottish Government has been receiving large amounts of funding for student loans through the Barnett formula: see here. This is a consequence of the extra loan required to underpin the new fee regime south of the border. The money cannot be used on much else but student loan. With the cash budget under significant pressure, it has made sense from the perspective of the Scottish Government to find uncontroversial ways to replace grant with loan. Young Student Bursary ended up in the path of this financial double-hit.
The undergraduate student support figures for Scotland for the next academic year, 2014-15, are now available. The expectation that students from the lowest income backgrounds will carry a higher share of Scotland’s student loans than those from better-off ones continues.
They were announced in three stages.
1. The Cabinet Secretary gave a speech on 20 October highlighting the overall increase in the total value of support for full-time undergraduates, from £7250 to £7500 (a cash increase of 3.4% and therefore a real terms increase of around 1.5%). Footage of the speech is no longer available on-line. However the section on student support was delivered pretty much as written, with minor changes from the printed text (for example, a specific criticism that what the Labour Party “really thinks is that the costs of education should be borne by students” was omitted and reference to the NUS describing the Scottish arrangements as the best package of student support in the UK was made only once, not twice). This increase was reported in The Herald and by the BBC – with the further announcement of an extension of living cost loans to postgraduates being the headline in each case. (NB Although the BBC report refers to a general rise in bursaries, this is a reference to FE bursaries, not those in HE).
2. On the same day the Scottish Government issued a press release which set out that the increase of £250 would be delivered through the use of student loan. The Scotsman seems to be the only major news outlet which picked up this aspect in its reporting. Although the government news release dealt with FE bursaries and included a reference to “Today’s announcement to increase bursaries and loans”, no information was provided on HE grants at this stage, so it was not clear what the plans were for these.
3. On 29 October, figures for higher education grants were included in the notes to editors of this news release accompanying the release of the SAAS spending figures up to 2012-13. The grant figures for next year are the same in cash terms as for this year: no inflation increase has been applied. As this analysis from last month shows, this was always a likely outcome of the draft budget figures.
Although it would surely have been more straightforward to include the grant figures as part of the 20 October release announcing other aspects of the 2014-15 HE package and the plans for FE bursaries, this year’s approach is a significant step forward from last year, when the grant figures were not referred to in any government news release. It holds out the prospect that next year may see a return to the conventional practice of including information about grant levels as part of the main announcement of HE student support plans.
The most recent news release has been covered so far in The Daily Record and The Herald – though both concentrate on a (counter-intuitive) fall in spending on bursaries, and the numbers receiving them, between 2011-12 and 2012-13, evident from the SAAS data. The freezing of grants is not picked up.
Effect of 2014-15 figures
The latest information shows that the thresholds at which grant and loan rates reduce are unchanged. This means the maximum package will be available up to £16,999, with steps down at £23,999 and £33,999. As the table accompanying the figures shows, the new figures will mean the student loan required to access the full value of the package at the lowest incomes will be £5750 for a young students (£23000 over 4 years). For a mature student, it will be £6750 (£27000 over 4 years).
The NUS is quoted in various articles as intending to lobby for an uplift in grants. Figures are not available for expected grant spending in the current year. The recently published 2012-13 figures do not allow for the significant reductions applying from this autumn. However, it seems likely that total grant spending is now around £75m a year, of which perhaps £10m is accounted for by DSA and other smaller grants. Applying an inflation increase to the remaining £65m would cost around £1.2m.
The total budget for grants and fees increases by £3.6m (1.2% cash) in 2014-15 and then falls by £0.5m in 2015-16. Increased support will need to be found to cover the cost of more fee support for part-timers, already announced for this year. Also, according to evidence given recently by the Cabinet Secretary to the Education and Culture Committee, student numbers are expected to rise further – their fee and grant costs will fall to this budget.
Finding an additional £1.2 million to spend on grants from within the existing budget estimates therefore looks pretty difficult – not least in relation to the additional spending it would embed for 2015-16. The recent announcements look at first sight to be final decisions. However, the Scottish Government evidently attaches importance to the support of the NUS for its student support package, so it remains possible that this is not yet the final word.
Footnote : other parts of the UK
The 2014-15 figures for English students are available here. A below-inflation increase of 1% has been applied both to grants and loans, so the the total maximum package for students away from home will be worth £7249 pa. This is available for incomes up to £25,000, with the grant component of that now worth £3387. As in Scotland, thresholds for entitlements are the same as last year.
England therefore offers £251 less than Scotland in spending power for students away from home for those up to £16,999. However, at incomes between £17,000 and £24,999, students away from home will receive between £499 and £999 pa more than in Scotland and, for this group, spending power remains higher in England until family incomes reach just over £50,000. Students living at home do however generally have higher spending power in Scotland, except for a small group with incomes in the mid-£30,000s, for whom the English package is still marginally higher.
Figures for Wales and Northern Ireland do not yet appear to have been made public.
The Independent Commission on Fees has recently published a useful report analysing UCAS applications across the UK for 2013. The full report is available at the foot of this press release.
The report emphasises that the introduction of higher fees in England appears to have had the largest impact on mature students, where numbers in England have fallen significantly, while they have risen in Scotland and Northern Ireland.
It also notes: “For school leavers, the figures should be seen in the context of a decreasing population of young people. The proportion of school leavers applying appears to be remaining constant in England, while showing some continued growth in Scotland, Wales and Northern Ireland.” Wales and Northern Ireland have continued with fees of just over £3000 a year.
For Scotland specifically there is interesting data showing that the overall growth in applications of 0.7% since 2010 has been driven by a 16.5% increase in applicants aged 20-24, while applications from younger applicants have fallen by 2.8% and older ones by 5.8%. This peak in 20 to 24 year olds is common with Northern Ireland and Wales: England is only nation where applications fall most steeply in higher age groups. Northern Ireland is the only nation where applications have increased in every age group. It is possible that the economic position is driving up applications from 20 to 24 years olds in the nations with no or lower fees, while the £9000 fee regime in England uniquely more than counter-balances that effect.
The analysis also provides data by country on gender differences in application rates and in patterns of cross-border applications. The detailed analysis also shows that applications in England have been most affected from groups in the highest participation neighbourhoods, while those from low participation neighbourhoods have been less affected.
This table sets out the figures for net student loans advanced and the resource cost to the government (the “RAB charge”) of making loans. The RAB charge is calculated as a percentage of gross loans advanced.
| 2012-13 | 2013-14 | 2014-15 | 2015-16 | ||
| £m | £m | £m | £m | ||
| Cost of providing loans | Previous plans | 88.4 | 134(+51%) | 181.6(+35%) | n/a |
| New plans | n/a | 134 | 181.6 | 302.1(+66%) | |
| Net loans advanced | Previous plans | 241.3 | 408.3(+69%) | 468.3(+15%) | n/a |
| New plans | n/a | 408.3 | 468.3 | 468.3(+0%) | |
Detailed figures from Table 5.07 in each draft budget document.
The notable feature here is the 66% rise in the RAB charge expected in 2015-16, while the estimate for net loans remain flat. This is not explained in the draft budget document.
Possible explanations would be an expected very sharp rise in the RAB charge from its current level of around 30% (unlikely) or expectation of a large rise in gross loans advanced (more likely, although current policies provide no reason to expect this).
Student loans and the RAB charge are both ring-fenced within the Scottish Block and so the Scottish Government may simply be entering the amounts passed to it for each of these by the UK government.
Even then, however, this is an unusual pattern and it will be interesting to see if anything emerges to explain it during scrutiny of the budget by the Scottish Parliament.
Adventures In Evidence 