Fortune favours the bold…or is it the rich?
A study by a UK think-tank has crystalised what many already believe – students from wealthier backgrounds can enjoy a “huge financial advantage at the start of their careers” when compared to their less wealthy counterparts, graduating with less debt thanks to their privileged background.
According to a report by the Intergenerational Foundation, titled Escape of the wealthy: The unfairness of the English student finance system, 10 percent of students in English universities can afford to pay their fees upfront, thus avoiding the 30-year burden of student debt.
— if.org.uk (@inter_gen) January 15, 2019
Meanwhile, students whose parents can’t support them financially may turn to student loans to finance their education.
Under the existing design of the English student finance system, students start repaying the loan when they earn over an annual income of £25,000 a year. However, if they do not earn enough to pay off the loan, the balance will be written off – but only after 30 years.
The report’s authors, Dr Muhammad Rakib Ehsan and David Kingman, note that “wealthy students will escape the average £5,800 of accrued interest upon graduation – roughly the tuition fee total for two undergraduate degrees prior to the 2012/3 hike following the Browne Review” by paying their fees upfront.
The number of self-funded students is higher at English Russell Group universities, including King’s College London, Oxford, Cambridge, UCL, Imperial and the London School of Economics.
The report noted that borrowers face having nine percent of income over £25,000 a year deducted from their wages for the next 30 years, which can prove to be a burden for graduates.
Student loan repayments can make it difficult for them to save for a house and retirement, among other things.
Richest 10% of 1m UK-domiciled full-time/part-time students studying first degrees at English universities escape student fees by paying up front, undermining successive government claims that the current system is progressive @inter_gen @rakibehsan https://t.co/oLEKmAkpps pic.twitter.com/DWnlo9RXAL
— Louis M M Coiffait (@LouisMMCoiffait) January 15, 2019
Authors highlighted that “the current student loan system is broken” while “poorer students have no choice but to enter a punitive student finance system which can be avoided by those who have their tuition fees paid for upfront by their financially well-resourced families. This is clearly unfair, and only serves to reinforce inequality in society as a whole.”
To address the unfairness of self-funding, the authors recommended scrapping the loan system, adding that the government could return to fully grant-based higher education funding, such as abolishing tuition fees and student debts completely.
However, they noted that this recommendation does have its drawbacks – chief among them: it would be “colossally expensive for the government – even before it decides whether or not to write off the debts of graduates who took out student loans over the previous decade or more.”
Their other suggestions include replacing loans with a graduate tax, adjusting the current system of loans, and making loans obligatory.