Take up fees: The NUS has got it wrong. Fees help the poorest.Tweet
Name:Professor Nicholas Barr
Title: Guest ContributorOccupation: Professor of Public Economics at LSENicholas's Full Profile
When I was a lad, students were leftwing and campaigned for progressive causes. So it’s good news that, last weekend, students campaigned to widen access.
The bad news is that they went about it the wrong way. Contrary to their intentions, the anti-fees demo was effectively campaigning to entrench middle-class perks.
How does the new system work? First – and central – university is largely free. The previous system required students to hand over a cheque on day one for fees. Now, most universities charge £3,000. But students do not have to write a cheque. The student loans company pays the fees, and money into the student’s bank account for living costs.
Students benefit because upfront fees disappear and the reforms increase the loan for living costs to a more realistic level.
The reforms benefit all students by reducing dependence on overdrafts and expensive credit-card debt. Students from poor backgrounds benefit even more because the system restores grants.
The new regime is better for the least well-off. The NUS should say so. These benefits are financed by taxpayers, who pay most of the HE budget. The rest will come from loan repayments.
The way the system works for graduates is not well understood. Repayments are 9% of earnings above £15,000. Thus someone earning £18,000 repays £270 a year, or £5.19 a week, a deduction on the payslip alongside income tax until the loan has been repaid.
Income-contingent loans are very different from credit card debt, which has a high interest rate, a short repayment period and no forgiveness if earnings are low. Student loans have built-in insurance: low earners make low or no repayments; repayments drop to zero if someone stops earning; people who never earn much do not repay; and any loan that remains after 25 years is forgiven.
We pay national insurance to finance our future pensions – income-contingent graduate contributions are the mirror-image.
A credit-card debt of £25,000 is seriously scary. A student loan of £25,000 is not. Over a working life, a typical graduate will pay nearly £1m in income tax and national insurance. Parents do not lose sleep over their children’s future tax bills; student loan repayments belong in the same box.
The system redistributes from today’s best-off (who lose some of their tuition fee subsidies) to today’s worst-off (who get a grant) and tomorrow’s worst-off (who will not repay their loans). Those campaigning to abolish all fees are campaigning to benefit tomorrow’s better-off graduates. This cannot be right.
The NUS argues that students should not pay high fees nor incur large debts. If government ministers wish to join a future demo, here are some placards they could use: “What fees? The reforms abolish upfront fees.”"Students get higher education free, it’s graduates who make repayments.” “It’s a payroll deduction, not credit card debt.”
The next demo should be about genuinely widening access. Access does not fail at 18 because of tuition fees. Access fails when someone leaves school at 16 for reasons that started much earlier. If the NUS organises a campaign to spend more on the under-fives, I’ll be marching with them.
Reproduced with with kind permission of Guardian News and Media LimitedTweet