Select Committee on Education and Skills Sixth Report


Student loans

  13. Full-time higher education students normally resident in the UK are eligible to apply for financial support in respect of meeting cost of living expenses and tuition fees.[12] Financial support for living expenses is provided in the form of interest free loans.[13] All such students are entitled to receive 75 per cent of the total loan (£3,815 for 2001-02; £4,700 for those studying in London and £3,020 for those living at home). Entitlement to the final 25 per cent is assessed by means test, either on parental income or on personal or family income for independent students.[14] Students from the European Union may be eligible for financial help towards tuition fees.[15]

14. Student loans were phased in during the period 1990-91 to 1998-99, gradually replacing means-tested maintenance grants. Students who entered higher education before September 1998 were eligible to apply for mortgage style loans,[16] the repayments being spread evenly over 5 or 7 years, depending on the number of loans taken out. Graduates whose income was below 85 per cent of the national average income could apply to defer payment, although interest continued to accrue throughout.

15. From 1999 students who began full time higher education on or after September 1998 received support entirely through the student loan system. Loans are repaid on an income contingent basis when the student has left higher education and their earnings reach a set level. At present the repayment threshold is £10,000[17] and repayments are fixed at 9 per cent of earnings above the threshold.

Tuition fees

  16. Since 1998 all new entrants to full time higher education have been liable to make a contribution towards their tuition fees. The level of contribution is revised annually and is set at approximately 25 per cent of the average cost of tuition. Full-time higher education students are, subject to means-testing, liable to pay the same annual tuition fee regardless of their choice of course or institution and the actual costs involved. The fee for 2002/03 is £1,100. Students whose parental residual income[18] is less than £20,480 are not required to pay any fees while families with a residual income of over £30,502 are liable for the full £1,100 fee. Residual income between these levels results in a liability for part of the fee. Fees are paid directly to the institution. In 2000/01, 42 per cent of all students in higher education were not required to make any contribution towards their fees. A further 19 per cent made partial contributions and 39 per cent made the full contribution.[19]

Additional funding

  17. Additional grants are available for students with particular needs or special circumstances. These include grants for dependants; childcare; travel; books and equipment; school meals; lone parents and care leavers. Students with disabilities may also be entitled to receive the Disabled Students' Allowance.

18. Students aged 21 or under at schools and colleges participating in the Excellence Challenge programme are eligible to apply for an Opportunity Bursary. There are 8,000 Opportunity Bursaries of £2,000 each for students from families on low incomes where there is little or no experience of higher education within the family.[20]

Student debt

  19. The level of student debt has risen sharply as the final stages of the student loan scheme have been rolled out. The 2002 NatWest Student survey[21] recorded current average levels of student debt at £5,635, an increase of 26 percent since 2001. For students pursuing certain specialised courses these figures are much higher: for example, the British Dental Association have reported average debts for final year students of £11,600.[22]

20. Future levels of debt will be linked, among other things, to the level of the student loan; for the 2002/03 academic year students living away from home and studying in London will be able to borrow up to £4,815,[23] resulting in a potential cumulative debt after three years of study of £15,000.

Students' paid and unpaid work

  21. The recent UNITE/MORI Student Living Report describes student life as significantly troubled by financial concerns[24] with 43 per cent of students doing some part-time work during term-time,[25] students finding it difficult to juggle the demands of academic study with other commitments at a highly pressured time in their lives.[26]

22. Estimates of the average number of hours worked range from 9 hours to 14 hours per week. Students from low income families and those who have taken out a loan tend to work longer hours, sometimes 20 hours or more each week. The majority of such students are employed on low paid unskilled work in catering, sales and personal services. Available studies of student employment show variations in the proportion reporting adverse effects on studies that range from 27 per cent to 79 per cent; much smaller proportions report positive effects of work on their academic studies.[27]

23. Our predecessor Committee made the following recommendation:

    "we recommend that higher education institutions should provide guidance to their students that they should not work in paid employment for more than 12 hours a week during term time. However, the Committee recognises that seeking to reduce non­completion by preventing students from working longer hours, if they are doing so in order to fund their living costs, may be self­defeating unless access to financial support for less well off students were improved".[28]

24. While some students benefit from study patterns which allow significant periods out of term-time in which to undertake paid work without detriment to their studies, the ability to find and do the work commonly available to students is not universal. Students with caring responsibilities will inevitably have less free time in which to undertake employment. Students with disabilities may have restricted free time because of the extra time they may need to perform the tasks associated with day-to-day living (for students with restricted mobility) or may need more time to do study-related tasks (for students with dyslexia, for example). They may also be unable to undertake paid work because of the nature of their impairment or because of discrimination by employers.[29] The bulk of students, however, do have an ability to earn out of term-time.

25. The financial imperative to find paid work also limits the ability of students to engage in valuable and rewarding voluntary work. This denies the voluntary sector a valuable resource and restricts opportunities for students to make a personal contribution to their communities. The proposal from the Institute of Public Policy Research that voluntary work by students could be linked to fee credits should be considered seriously in the Government's review.[30]

26. Those students who wish to work during term time should be encouraged, within the limit suggested in our predecessors' Report of no more than 12 hours of paid work a week in term time.[31] Experience of the workplace may bring significant benefits and enables students to limit their borrowing. However, we recommend that in its review of student support the Government should pay particular attention to the needs of a significant group of students who may be unable to work.

27. The proportion of student expenditure on maintaining a lifestyle of leisure pursuits, and particularly the consumption of alcohol and tobacco, has received significant media[32] and ministerial attention.[33] While it would be wrong to ignore the fact that students often incur debt, or decide to work, in order to support lifestyle choices, this focus can distract us from the reality of the serious hardship encountered by a significant number of students.

12   For full time study on a designated course or part-time initial teacher training Back

13   Interest is charged at the rate of inflation, giving a zero real rate of interest Back

14   Independent students' entitlement to financial support is assessed on the basis of the student's own income (together with that of their partner), rather than on parental income. Independent students are those for whom at least one of the following apply: those who are 25 or over; are married before the start of the academic year for which an application is being made; have supported themselves for at least three years before the start of the academic year for which an application is being made; have no living parents Back

15   Financial support for higher education students in 2002/03 ­ A Guide, Department for Education and Skills, January 2002, page 43 Back

16   The original mortgage style loan was introduced in 1990. The amount borrowed was at the student's discretion and between £50 and the maximum entitlement in each year. Loans could be received in up to three instalments, depending on the time of application. Mortgage style loans are funded by the Government and the interest rate is linked to the rate of inflation. Mortgage style loans were not means-tested. Back

17   The figure of £10,000 represents 42 per cent of the average gross annual pay for full­time employees in Great Britain for the 2000­01 tax year of £23,607. Source: ONS New Earnings Survey 2001 Back

18   Parents' residual income is calculated on the basis of gross income (before tax and national insurance) less allowances for: a dependant adult who is not their husband or wife, where that dependant's residual income is less than £2,360; parents' pension scheme and superannuation payments that qualify for tax relief; the cost of wages to a domestic help where this is required because of disability; parents who live outside the United Kingdom in a country where the cost of living is higher than in the UK; a parent who is also a student. Parents' actual contribution to fees and student maintenance is calculated using the following formula: no contribution if their income is less than £20,480; £45 if their residual income is £20,480; plus £1 for every £9.50 of residual income over £20,480. Parents with a residual income of more than £30,503 are liable for the full contribution. Entitlement is assessed on the income of the parent(s) with whom the student resides, but not on the income of step­parents. Source: Financial support for higher education students in 2002/03 ­ A Guide, Department for Education and Skills, January 2002, pages 16­17 Back

19   Statistics of student support for higher education in England and Wales, academic year 2000/01, National Statistics SFR 08/2002, 30 April 2002. The figures cited above refer to all (dependent and independent) students. 34 per cent of dependent students were assessed to make a zero contribution to fees and 45 per cent were required to make the full contribution. 89 percent of independent students were assessed to make a zero contribution to fees and 6 per cent required to make the full contribution. In 2000/01 there were 100,000 independent students (mainly aged over 25) and 586,000 dependent students assessed on the income of their parents and the students themselves. See paragraph 60 below Back

20   Financial support for higher education students in 2002/03 ­ A Guide, Department for Education and Skills, January 2002, page 23 Back

21   NatWest Student Money Matters 2002 Back

22   Cited by the National Union of Students see Ev 63 Back

23   Financial support for higher education students in 2002/03 ­ A Guide, Department for Education and Skills, January 2002, page 6 Back

24   UNITE/MORI Student Living Report 2002 page 17 Back

25   UNITE/MORI Student Living Report 2002 page 19 Back

26   UNITE/MORI Student Living Report 2002 page 40 Back

27   The Impact of Student Debt on participation and term-time employment on attainment. What can research tell us? Professor Claire Callender, South Bank University, October 2001, paragraph 6.4 Back

28   Sixth Report from the Education and Employment Committee, Session 2000-01, Higher Education: Student Retention, HC 124, paragraph 49 Back

29   Ev 135 to136  Back

30   Wendy Piatt, Civic involvement and Student Finance (forthcoming) Back

31   Sixth Report from the Education and Employment Committee, Session 2000-01, Higher Education: Student Retention, HC 124, paragraphs 47 to 49 Back

32   For example, see "Students drinking their way into debt", The Times, 1 March 2002 Back

33   Q 283 Back

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Prepared 11 July 2002