Student finance Budget proposals – the effects on poor students

The IFS have published a new briefing note which examines the two major changes to student finance as proposed in the Budget. The replacement of maintenance grants by loans from 2016–17 will raise debt for the poorest students, but do little to improve government finances in the long run. The proposed freezing of the repayment threshold for loans, on the other hand, will – if implemented – significantly improve government finances because it will result in an increase in graduate repayments.

You can read more of the IFS briefing note here.

Here is reaction from two academics who have researched student finance.

Comment from Professor Anna Vignoles, University of Cambridge and IFS research fellow:

“Our research shows that on average students from more disadvantaged backgrounds have lower achievement at A level and are therefore less likely to access degrees that lead to the higher end of graduate earnings, such as medicine.

On average therefore, poorer students will tend to have lower graduate earnings than their richer counterparts. So although poor students will indeed have higher debt when they leave university as a result of this policy change, they are unlikely to be paying a lot more for their degree because in practice a significant proportion of their debt is likely to be written off.

Despite this we might still worry that the fear of a larger debt is going to put off some students and we should not be too sanguine about this change until we see how students react.”

Comment from Professor Anne West, London School of Economics and Political Science:

“The effects of the removal of maintenance grants are likely to have even more far-reaching effects. Our research found that more affluent parents are better able to shield their children from debt – by paying all or part of their higher education costs, by putting money aside for future property purchases, by being prepared to step in to support loan repayments or by using other financial resources to pay off the debt.

Parents with lower household incomes were not able to shield their children from debt in similar ways.

There are very clear differences in the extent to which parents are able to mitigate the impacts of the student loan debt – more affluent parents are able to transmit their financial advantage to their children in a way that poorer parents are not, so creating a new emerging form of inequality, which the abolition of student maintenance grants will exacerbate.”

NOTE TO JOURNALISTS : RESEARCH REFERENCE: West, A., Roberts, J. Lewis, J. and Noden, P (2015) Paying for Higher Education in England: Funding Policy and Families

The research was funded by the Leverhulme Trust.

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