LABOUR IS WRONG: cutting university fees won't help the UK's poorest students
The lower-tuition proposal is actually a move back to the old student loan system, which was was replaced by the current system in 2012.
Under the new system, tuition fees are capped at £9,000 compared with the £3,000 upper-limit of the previous system. Students who started their courses in September 2012 will have loans accrue interest at the rate of inflation, as measured by the Retail Prices Index, plus 3%.
Also, the threshold at which students must begin paying down their debts was raised to £21,000 from £15,000. So, even though tuition is higher, under the current system more low-earners will not have to repay part or all of their loans because they likely won't hit the £21,000 mark.
It's true that students leave university with more debt under the current program. The average student will now graduate with around £44,000 worth of debt compared with an average of £24,754 under the previous system, according to the Institute for Fiscal Studies (IFS). This means students will, on average, pay back substantially more than they did under the old system. The IFS estimated that it would be in the region of £66,897, compared with £32,917 under the old system.
While those numbers are intimidating, a better understanding of how the current system works shows that it's both more sustainable and advantageous for the people that need it the most than the old one.
As the BBC's Chris Cook explains, the greatest fears surrounding the increase in student tuition fees was that it would dissuade people from poorer backgrounds from applying to university. But that hasn't happened.
Why? Well, in part this is because the loans are income-contingent (that is, repayments are tied to how much you earn in future). As a consequence if people take on the debt to go to university but can only find low paid (below £21,000 a year) work to do afterwards they will not have to pay back that debt. And even if they do begin earning over that threshold, if they have not paid it all back after 30 years the remainder is written off.
As the IFS states (emphasis added): "The lowest-earning graduates, whose income rarely exceeds £21,000 a year, will, however, pay back less under the new system, mainly because of the higher level of earnings required before repayments are made."
Cutting tuition fees helps higher-earners most, as they are able to pay back their loans faster than they otherwise would - and since men earn more on average than women, males would get the majority of the benefits.
In both instances, the goverment set a 30-year-time limit for students to pay off loans before the debts are written off. The IFS study estimated that under the current system (where students graduate with more debt), up to 73% of students will have some debt written off at the end of the repayment period with an average of around £30,000 wiped out. Critics argue that this proves that the new system is worse than the one it replaced, where only 32% saw any debt written off.
It would do nothing to help the worst paid who already have their debt written off under the current system.
That is not to say that the government doesn't deserve criticism for over-optimistic forecasts for how much the fee hike was likely to save the Treasury, but making university funding more regressive is unlikely to be the best solution. Britain's students deserve better than headline-grabbing promises that are only likely to disappoint.