I’m old enough to have only skirmished the beginnings of student loans in the early nineties, with a paltry three-figure sum to repay as opposed to the five-figure sums of today. However, I do have to admit that I have skin in the game as I have three school-age children and higher education is coming up on the horizon, fast.
I was jolted out of my petrified state by a recent article by Claer Barrett [Paywall] which put numbers on my worries and laid out the issues very succinctly, and it turns out that it’s worse than I thought.
If you break down European countries into groups based on loans / tuition fees etc (see below), there are four groups ranging from no/low tuition to ‘modest fees’ to ‘moderate fees’ to ‘high fees + large income-contingent loans’, England and Wales (which has a slightly different set up, though the core is the same) are the only occupants of the latter group with Scotland nestled amongst the Nordics in the first group. So my first question would be, if other European countries can manage not to fleece the workers of tomorrow, why can’t we? At what point did we move from the European sensibility of ‘getting a degree is good for the country’ to the American ‘getting a degree is only good for yourself’?
Well, it was done in a typically underhand and political way. First it was PM John Major in the early 90s who miraculously doubled (or something like) the number of places at university overnight by turning all Polytechnics into universities (even 30-odd years later I have never once come across anyone who thought this was a good idea). And then Tony Blairs’ government decided it would be a good idea for FIFTY PERCENT of young people to have a degree, without increasing general taxation to pay for it.
Cut forward 30 years and now we’re in a pretty mess. I hate the phrase ‘a tax on ambition’ – it’s usually used as an excuse to not tax the rich enough, but here it has a point. You can find the details in the Claer Barrett article cited above, but the long and the short of it is that Student Loans in England and Wales are a) only begun to be repaid once an certain income threshold is reached, and b) wiped after thirty years. There is no need to get technical about this, as without talking figures, you can see that the incentive here is to earn below the threshold for as long as possible before the thirty-year point is reached and wipes the lot. And in the UK we wonder why we have a productivity crisis when we are incentivising some of the best and brightest to not reach their full potential.
Of course, there are plenty more things wrong with the way the whole thing is set up. Exhibit A is the repricing of the loan that vulnerable teenagers signed in good faith before they started their degrees, breaking any trust they may have had in the system, there is the Rethink Repayment campaign which is trying to do something about this. But it assumes the core of the student loan system is sound. It most definitely is not. As Claer Barrett points out, many refer to the Student Loan system as a graduate tax, which it isn’t. A graduate tax would be fairer as every graduate would be liable to pay it. But in the Student Loan system the children of the wealthy don’t need to pay. For those able to fork out for school fees, affording to pay for a child’s university university could well be a net saving on what they are used to forking out. With grants available for the less well off, the Student Loans scheme is a tax on the children of the middle class (not the wealthy upper middle class), further impoverishing them and widening inequalities. Indeed, a graduate tax would be a step in the right direction. As it stands, Student Loan Repayments are a regressive tax.
If we want to get richer as a nation we need to be investing in the young, we need at the very least to pay, as a nation, tuition fees for our students. Tax cliff edges don’t work, and is an argument against income taxes themselves. In the meantime we should at the very least get in line with our European neighbours.
House of Commons Briefing Paper – Update on the sale of student loans (September 2020)
Selected European Countries by University Fee System
I drummed up the following from ChatGPT.
- 1) Nordics-style: no/low tuition, but loans are common for living costs
- Denmark — no tuition fees for home/EU students. SOURCE
- Sweden — no tuition fees for Swedish/EU/EEA/Swiss students; student support includes grants + loans. SOURCE
- Finland — no tuition fees for home students; fees mainly for certain non-EU/EEA cases. SOURCE
- Norway — public HE has no tuition fees; student support includes loans. SOURCE
- Scotland — tuition paid for eligible Scotland-domiciled undergrads studying in Scotland; loans exist for maintenance. SOURCE
- 2) Modest fees: low tuition/registration charges, targeted aid
- France — regulated low public fees (e.g., €175 bachelor / €250 master noted by Eurydice). SOURCE
- Germany — generally no tuition fees in public universities (admin fees may exist). SOURCE
- Austria — fees waived for home students within standard duration (+ tolerance); regulated semester amounts where charged. SOURCE
- Switzerland — tuition set by institutions/cantons; generally low/moderate compared with England. SOURCE
- Italy — income-related fees; ISEE < €20,000 exempt (from 2021/22). SOURCE
- 3) Moderate fees: tuition exists (often a few thousand), support layered on
- 4) England outlier: high fees + large-scale income-contingent loans