Russell Group urges rethink on student loan interest rate
The Russell Group, which represents the UK’s most prestigious universities, has joined calls to make funding fairer for students, urging the government to look again at the 6.1% interest rate on loans due to come into force this September.
Dr Tim Bradshaw, the Russell Group’s acting director, described the rate as “very high” and “out of touch” with commercial lending rates. “A reassessment here now seems highly appropriate as inflation starts to return,” he said.
He also called on the government to reconsider the £21,000 income threshold at which graduates become liable to start paying back their loan, suggesting a higher level would enable them to keep more money early in their careers.
Bradshaw’s comments, made in a blog this week, come at a time of increasing concern and scrutiny of rising tuition fees and the growing debt burden facing students.
Responding to the Russell Group intervention, the universities minister, Jo Johnson, defended the current arrangement. “Our system – where costs are split between the taxpayer and the student – is helping more young people from disadvantaged backgrounds go to university than ever before, up 43% since 2009,” he said.
“We should of course not be complacent. Students deserve value for money for the courses they are paying for. One of the central goals of our higher education reforms is to make universities accountable for students’ experience and the quality of education they receive through the teaching excellence framework.”
Labour’s shadow education secretary, Angela Rayner has been granted an emergency debate on tuition fees in the Commons on Wednesday.
Last week, Andrew Adonis, the architect of the student loans system under Tony Blair, called for tuition fees to be scrapped after becoming a “Frankenstein’s monster” that leaves students with crippling debts. On Sunday, the shadow chancellor, John McDonnell, clarified Labour’s position on wiping out student debt, describing it as “an ambition”.
Bradshaw’s comments suggest a shift in thinking at the Russell Group, which represents 24 leading UK universities. In his blog he accepts much of the current system which maintains sustainable funding in higher education, and acknowledges that students should pay some contribution.
But he added: “I think we can still look again at how the system might be made fairer for students without undermining the sustainability balance.
“First, the interest rate on loans at up to 6.1% from this September (RPI + 3% for those on salaries of £41,000 or over) is out of touch with commercial lending rates, and very high compared with the rates at which the government can borrow.
“The £21,000 repayment threshold could also be reconsidered. A higher level would allow new graduates to keep more of their earnings early on when individual finances are often tight.”
The government was accused of betraying a generation of students after abandoning its previous commitment to uprate the repayment threshold in line with inflation in the 2015 autumn statement.
Bradshaw noted: “Many have argued reinstating the link could be of particular benefit to those students on low and middle incomes.”
He also suggested repayments could be made through salary sacrifice arrangements which would reduce the tax bill for graduates, adding: “Of course, there is a cost to government finances for each of these suggestions, but ultimately this should be seen as an investment in the long-term sustainability of the UK’s higher education system and in the future of those who study hard for their degrees.”