Saturday, October 9, 2010

Student Loan Compromise

I've just read that the Government is close announcing they've agreed on one of the most contentious policies between the Tory and LibDem coalition partners - student tuition fees and student loans.

It seems likely that they have settled on a "progressive graduate contribution" - a loan repayment scheme that increases in proportion if the graduate succeeds in earning more than average. The idea being that those students that earn less will end up not having to pay back as much as higher earners.

The agreement, and the likely recommendation from the Lord Browne review (due to be published on Tuesday), is that the tuition fee cap will raise from £3,290 to £7,000. This will be a major issue for the LibDems whose manifesto promised no tuition fee increase, but the hope is that the progressive nature of the new loan payback plan will satisfy their concerns.

For my part I'm happier with this idea than Cable's graduate tax but still not convinced it is completely sensible.

The tuition fee does not have to be paid upfront, it goes towards the amount owed after the course is finished. So, there's no upfront cost to make each potential student think deeply about whether or not they are really committed to achieving a good degree or, indeed, if it's the right thing for them and their aspirations. I'd like to see a modest initial fee, payable within the first year, that would really focus the mind of a student. It would discourage some from going to University, but I think we need to move away from the idea that the more Uni educated people the better. It should be about quality, not quantity.

Then there's the "progressive" element of the proposal. Once graduated, there'll be a real disincentive to succeed. Although it's not clear what the exact figures will be, it seems that higher earners will pay a bigger percentage of interest on their loans than lower earners. Those that end up
forging ahead with their careers will be penalised for no other reason than they dared to succeed. Those that aren't so bothered, or worse, only went to Uni to avoid work for a few extra years, will earn less and will not be expected to pay back as much. Some will say that it's only fair that the better paid pay more, but they do anyway - in taxes. They earn more so they pay more. There's no justification for making them pay more for their loans.

There's no easy answer. But I'd have preferred to see a system that encourages young people to make the right choices for their aspirations and abilities while encouraging ambition and a drive to succeed once graduated. This proposal looks like a political compromise and it doesn't seem to do either.

We'll have to wait to see the actual details of the proposal. There could be a lot more to it than we're seeing in the latest leaks. I certainly hope there is.

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