Comment Writer Yaaseen Baksh expresses their concerns regarding student campaigns aiming to reduce tuition fees, arguing that a reduction would do more harm than good for most students

Written by Yaaseen Baksh

Over the past year and a half students have been campaigning to reduce the Tuition Fee, which currently stands at £9,250 an academic year. They argue that this should happen because they are not receiving the ‘experience’ they signed up for when they applied to university. You only need to go onto online forums like The Student Room, look at newspaper articles where real students have been interviewed to realise this. This includes in-person teaching rather than online and to spend time making friends and going out. However, as a student who has received online-teaching I can say that I personally do not feel that I have not missed out on any seminar time, lecture time, tutors have still handed out work, essays have still been written by me and marked by tutors promptly. 

The format has had little impact – it is just where we study rather than the quality of our education

What are the changes of online learning? For me, it has just been the format. But in my view, the format has had little impact – it is just where we study rather than the quality of our education. To add, students attend university to receive an education.  In my opinion it is not a free pass to party all night, especially in the backdrop of a global pandemic. Therefore, this part of the argument, I think, should be completely null and void. Student’s add that ‘they did not know there was going to be a pandemic’ otherwise they would have taken a gap year. But there was no guarantee that there was ‘not going to be a pandemic’ or any other scenario that would have changed the future of their education. Students cannot argue that they did not know as nobody did, this is life and you just have to take it. This is just from my education point of view.

Why don’t we look at the maths. Student ‘loans’ are not really loans. A loan has to be paid back in full in fixed payments including all the interest. A student ‘loan,’ for all those on Plan 2 loans, is paid back at 9% of anything over £27,295 and is wiped after 30 years. Therefore, the amount you pay back is not based on what you borrow but what you earn. So, it is nothing like a normal loan. If you earn under the threshold then you do not pay back anything. There will be no debt-collectors and it will not go on your credit file. It is collected automatically by the tax-office like an extra tax. If you do not earn enough then you do not pay the extra tax. So, University education loan repayments work on a ‘no win, no fee’ model. This is because if you earn under the threshold you have not financially benefited from your university education so pay nothing. However, if you earn over the threshold then you are deemed to have benefitted from your education, so owe the 9% above the threshold.

Let us use the Student Finance Plan 2 repayment system of paying 9% of anything above £27,295. If we say that a student borrowed £60,000 and is earning £30,000 they will pay £243.45. If we cut it by £10,000, so a student borrowed £50,000, and is still earning £30,000 they will pay £243.45! The total is exactly the same. This is because the amount you pay back is predicated on how much you earn, which in both scenarios is the same. It is not predicated on how much you borrow. Therefore, changing the tuition fee will have no impact on how much you pay back.

Let us go deeper, though. Cutting student loans means that those who earn more will pay it off quicker so in real terms pay less. We need an example to demonstrate, the following examples are for demonstration purposes so the figures may not be totally representative of the end student loan figure but the formula and principle applied is exactly the same. Therefore, using different figures does not, in any way, invalidate the conclusions being made.

Let us take a student loan of £60,000, near enough to what current students take out over three years without the interest:

Graduate 1 – earns £80,000 per annum and has a loan of £60,000 so pays back all of their loan in less than 13 years

Graduate 2 – earns £40,000 per annum and has a loan of £60,000 so pays back £34,303.50 over 30 years

Graduate 3 – earns £28,000 per annum and has a loan of £60,000 so pays back £1,903 over 30 years

Now let us look if we cut the student loan by £10,000, so a £50,000 loan:

Graduate 1 – earns £80,000 per annum and has a loan of £50,000 so pays back all of their loan in less than ten years

Graduate 2 – earns £40,000 per annum and has a loan of £50,000 so pays back £34,303.50 over 30 years

Graduate 3 -earns £28,000 per annum and has a loan of £50,000 so pays back £1,903 over 30 years

As you can see, graduate 2 and graduate 3 pay back exactly the same amount, however, graduate 1 has paid it off quicker. Therefore, they have saved three years of payments. They have increased their wealth due to a cut in tuition fee. While graduate 2 and 3 have saved nothing. Graduate 3 has clearly benefited more from their university education than the other two graduates but pays less back after a cut in the tuition fee – this contradicts the ‘no win, no fee’ model of student loans. Therefore, cutting student loans puts the highest payers at a financial advantage in life which in turn disadvantages the middle class and working class graduates more.

This may mean that the government freezes the threshold so that they can claw back more money. As the rich graduates have paid their loans, this will affect the middle class and working class graduates . Freezing the threshold may sound like a good thing, but it is not. The threshold normally rises in line with earnings. If it is frozen, then it is below average earnings. So, after the 9% tax is taken then you have less than an average earner who does not have a university education. Therefore, promoting a tuition fee cut is to line the pockets of the rich and encourage the government to introduce stealth taxes like a threshold freeze.

Promoting a tuition fee cut is to line the pockets of the rich and encourage the government to introduce stealth taxes

You might be thinking that the easy way to solve this is to pay off your student loan if you can. So, graduate 2 may come into some money, say £30,000. They would have ordinarily paid £34,303.50 of their £60,000 loan over thirty years at which point it will be wiped. If they paid in £30,000 at the start, they will have a £30,000 debt leftover. If they earned £40,000 that would mean they would pay £1,143.45 of their student loan per year. Therefore, it would take them 26 years to clear their student loan. They have saved paying their student loan by four years, which is £1,143.45×4 which is around £4,600. Therefore they have given up £30,000 to save £4,600 in 26 years’ time. So they have voluntarily burned £25,400 on a bonfire and have ruined finances. Showing that there is no benefit in paying extra on student loans for middle class and working class earners. 

Currently 17% of graduates fully pay off their loan, while 83% do not. Therefore, cutting student loans will only positively impact the finances of at least 17% of graduates. And those are the richest 17%. This is demonstrated above. University education and the student loans are supposed to benefit society and the individual.  But those who campaign to cut student loans will financially hurt the vast majority of future graduates and create a more unequal society which will be designed to benefit the rich.

Recently, staff at universities have been striking. Students can write to their university to ask for a refund on their loans. However, following the re-payment system, as outlined above, it will not make any meaningful financial difference. It will create a symbolic statement though, no doubt, which is that students are annoyed with their University and want to create noise about how badly their institution is behaving toward their employees. 

What students should be campaigning about more is to increase the maintenance loan. The cost of living is estimated to go past 8%, as forecast by the Bank of England. The cost of gas is going up, with the energy price cap being increased by £700 in April 2022, which is mainly due to the increase in standing charges due to firms having to absorb the customers of those who have gone defunct. The cost of train fares is going up by 3.8%. A war has just started which will cripple Europe in the 2020s. So we need the maintenance loan to go up. Not a tuition fee cut. Yet those campaigning for a cut to the student loan want students, in effect, to pay more for their education in a future of economic uncertainty. They are causing a distraction away from the maintenance loan – which is what is really hurting students.

They are causing a distraction away from the maintenance loan – which is what is really hurting students

This symbolic act of asking for a refund, as mentioned above, still may have a negative impact if students go ahead and in receiving a refund or carrying on to campaign for a tuition fee cut. Cutting the tuition fee means that universities will have less money. This in turn will create a poor education for students. Therefore, students cannot benefit from their education as much. So they may just be earning above the threshold when they leave university or below it, meaning a university education has not benefited them. But it may have, if a tuition fee cut was not put in place. 

To conclude, in my opinion cutting the tuition fee is bad on all levels. It should not happen. Students should not campaign for it to happen. Thankfully, though, the government has introduced certainty to this issue and said that it will not happen. Despite this, students still want it to happen. To continue would mean a continuation of perpetuating the lies and misinformation about the nature of student loans. I believe that the government is on the side of students, on the side of the least well off and on the side of society. After all, that is what their ‘level-up’ agenda is all about. I think they have made the absolute right decision in this saga. They have protected the poorest future graduates and ensured a more equal society by not cutting the tuition fee loan. The government has also ensured that the proposal to cut the threshold students pay will not affect existing students, therefore ensuring that there will be less retrospective changes. In other words, student loan repayments will not change. I think that is time for students to see that the government is taking the right steps.

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