Every bit of the UK needs to tackle fiscal drag on its student financial support

I’ve been quite critical of the Westminster government’s efforts on student financial support, so while we were weaving our way around Scandinavia on a coach before Easter, I thought I’d use up my data and dive into where we’re at around the nations.

As we know, every time someone fiddles with (or indeed fails to fiddle with) tuition fee rates or the terms of the loans that support them, a chorus of people come out to argue that students are going to be “priced out” of education – when it’s maintenance support that has the (much) bigger impact.

Spoiler – that problem with fiscal drag, where nobody worried too much about uprating things properly and quickly when inflation was low but now really should, is now manifesting around the rest of the UK too.

Wales

For Welsh domiciled students, the core support for undergraduates comes in the form of a hybrid loan and grant, the maximum value of which (for those away from home and outside of London) is linked to the National Living Wage. Take £9.50 per hour, multiply it by 37.5 hours a week, multiply it again by 30 weeks and you get £10,688 a year to live on.

(The actual figure on offer for this September is £10,710, because back in January when it had to propose the relevant secondary legislation, the Welsh Government assumed that the NLW would be £9.52).

That was also the basis for the away from home, outside London maximum loan that Augar proposed for English students – a proposal that the Westminster government didn’t even bother to respond to three years later, defaulting back to index-linked increases.

It means that those maximum “pound in your pocket” figures are starting to drift apart in quite a stark way. Take a Welsh student and an English student sat across a table together in a Scottish HMO, and you’ll find the Welsh student has £1,004 extra for the year – or £708 if they’re in London, or £924 if you compare two students living at home.

Incidentally, while Augar didn’t even bother to interrogate the basis for the differentials on the away from home/London and living at home rates, Wales’ Diamond review at least mentioned them – noting that those living away from home in London were getting 25 percent more than the baseline, and those at home 15 percent less.

Diamond offered no basis for maintaining that status quo other than inertia – and it remains the case that nobody in Wales or England can produce figures that justify your average student living at home only having 15 percent lower costs than someone away, and those in London only facing a 25 percent higher set of costs. The problem is that the +25% and -15% assumptions come from an age when rent proportionally made up much less of a student’s average income, and so really now need a revisit.

Of course, the Welsh system has some generousities buried in the headline figure. The maximum that a student can borrow is not means-tested in Wales – so many more students on modest incomes have even more in their back pocket than English counterparts. And the total comes as a mixture of grant and loan, with the grant component dependent on household income, and a loan component topping up to the totals implied above.

As we’ve noted elsewhere on the site, the mixture of grant and loan here is partly an expensive psychological trick – even in Wales most plan 2 borrowers don’t pay off in full, so all the grant component does for most is lower the notional principal figure in the bottom corner of the student loan statement rather than actually lower monthly or lifetime repayments.

We also shouldn’t forget the yawning differences on PG funding. For Welsh masters students starting in September, the Welsh Government is offering £18,430 to cover fees and maintenance (again, made up of grant and loan depending on household income). By contrast England is only offering £11,570 – a figure that looks more and more paltry each year as student inflation outpaces general inflation, and PGT fees rocket up.

There’s a couple of naughty bits to take notice of. Any Welsh students who started their course before 1st August 2018 are still only having their maximums uprated by inflation – and a “projected inflation” calculation of 2.2 percent at that. Welsh ministers almost certainly have the powers to correct that in light of rocketing real inflation in the current year if they choose to.

In addition Wales is only uprating the additional Disabled Student’s Grant and the amount of Grants for Dependants (including the Childcare Grant) for this September by that dodgy 2.2 percent projection figure – a rough deal for a group of students in some of the greatest need of support during as cost of living crisis that ought to now be reflected in measures in Fee and Access Plans. And that split between grant and loan on the core is determined by household income – Wales is leaving the thresholds that apply on that taper fixed rather than uprating them, and so fewer and fewer students are getting the maximum grant component because fewer families are on £18,370 than there were in 2018.

A couple of other bits on Wales. Diamond recommended that students be given the option of having maintenance support paid to students on a monthly basis – evidence received from student representatives indicated that this would benefit students by enabling more effective financial planning and budgeting. And over concerns about the costs of study, Diamond said that HEFCW should annually collect the prices of a basket of goods for each university and publish them – a kind of provider by provider student inflation figure. The Welsh Government accepted both of those recommendations at the time – but neither the SLC nor HEFCW seem to have been able to actually implement them.

Scotland

In Scotland, at least for Scottish domiciled undergraduates, there’s no tuition fees to pay – unless you venture outside of Scotland where you can get a loan to cover the going rate. When we mash together the maintenance loans and bursaries on offer for Scottish domiciled students, we’re looking at a max of £8,100 (£6,100 loan, £1,000 bursary) for those who families earn less than 30k – although unlike in Wales that max declines to £5,100 for those whose families are on £34k or more.

And as we see in Wales and England, those family income thresholds seem to be fixed in actual rather than real terms – so every year as wages increases the proportion of families that can get maximum help stealthily declines, as does the amount of help on offer if, for example, your mum and dad’s pay increases tip them from earning £20,999 to £30k. Uprating these thresholds never mattered much when inflation was really low – but the cumulative impact over time is big, and need a proper look at across the UK.

The bigger problem in Scotland is that headline pound in your pocket problem. In 2016 the SNP manifesto promised a review of student support – to be fair that commitment was met, it’s just that most of the recommendations in it lie unimplemented. Similar to that which Augar and Diamond recommended, the review proposed a minimum income for students (largely to be made up of loans, but still) but all that really happened was modest bumps to the Young Student Bursary (YSB) and the Independent Student Bursary (ISB).

There are differences – there’s no differences for students living at home or in London in Scotland – and maintenance support is paid monthly. And while a rise this September of that max pound in the pocket of 4.5 percent is better than England and Wales, it still results in a lower total value of support, and won’t go near matching where inflation will actually get to this year. And the repayment threshold only went up top £25k last April, and isn’t being updated – resulting in the same fiscal drag problems that we see elsewhere.

Masters support is also pretty poor for Scottish domiciled students – there’s a max £5,500 loan to go towards tuition fees, and a £4,500 maintenance loan. Scandalously, if the PGT qual lasts two years, those numbers get split across the whole course rather than being per academic year. And if you fancy doing a PhD, there’s no loans on offer at all via the government.

Northern Ireland

Which brings us to Northern Ireland. In Wales and Scotland you can argue that aspects of the system are designed to keep students studying in their own domicile, but in NI while about half of 18-year olds enter higher education, well over a third don’t study there – there just aren’t enough places. Despite this it has a really pretty mean student financial support system.

Fees for undergrads might only be £4,630 – and loans will cover it if you venture out around the UK – but the max grant and loan is £7,225 if you’re living in NI, or £8,315 if you’re elsewhere in the UK (with another bump for London). Those maximums only apply if your household income is £19,203 – a figure that, like around the rest of the UK, isn’t being uprated – and even more scandalously, there will be no increase at all in the value of maintenance grants and loans this September over last September.

As in Scotland, once you graduate, the repayment threshold is stuck on £25,000. And for PG courses, maximum tuition fees help is £5,500, with nothing for maintenance or doctoral degrees.

I know, I know, I’ve not covered all sorts of things in this canter here – this is as far as I got when the coach rolled into the service station just outside Oslo, and it means I’ve not interrogated some extra bits and bobs that some students get or indeed the relative costs of being a student or a graduate in different bits of the UK. Do also let us know if you think there’s anything wrong here in the comments below.

But the overall conclusion remains – every government around the UK that is finger wagging at Westminster over the benefits system now needs to take a serious look at the fiscal drag aspects of their own student finance policies – before we really do price a substantial percentage of students out of being able to access education.