Student Loans: 3 facts all students should know
"Student maintenance grants scrapped"
"One fifth of students won’t be going to university thanks to scrapping grants"
"Students abandoning their plans to go to university"
The headlines made for worrying reading as the news was announced that student maintenance grants will no longer be available from 2016 entry. As with any media headline, the reality of what this means for 2016 entrants needs to be properly explained, especially for students’ sake.
I despise any press scaremongering that makes students think, once again, that university is out of their reach. The concern for students should be one of attainment and achievement – not of financial support and affordability.
So what does the removal of the maintenance grant really mean for students?
Does it suggest that our poorest students should look at options other than university?
Fortunately for students, colleges and universities this is absolutely not the case. The removal of grants has no impact at all on a student’s ability to afford university. What we need to collectively ensure as advisers is that students also have access to the raw facts rather than just the dramatic headlines.
The grant has been replaced by an increased maintenance loan. Students with household incomes under £25,000 can receive £7,434 in total for living costs for 2015 entry (made up of £4,047 loan and £3,387 grant). For 2016 entry this rises to £8,200 albeit completely in loan form. This means that students will have more money available to them to cover their living costs while studying – surely that should be seen as a positive thing?
Having a greater loan amount has no impact on the amount a student needs to pay back per month, once they are earning. A student with £10,000 student loan pays back exactly the same monthly amount as a student with £40,000 student loan. Repayments are linked to what you earn, not what you owe.
The question of a greater overall debt hanging over the student must be addressed. In most cases, (other than the very top earners) students will not pay back their full student loan over the 30 year period, in which they are eligible to make repayments, before the loan is written off entirely. That fact, coupled with the payment being based on what you earn, not what you owe, means that in the majority of cases a student would pay off the same amount whether a 2015 entrant with a grant or a 2016 entrant without one, (despite the 2016 entrant having a higher overall total student loan). Tricky to wrap your head around without taking a step back and looking at the overall picture.
To illustrate this, consider the following example: A student has a low household income and therefore receives the full loan/grant combination available for their year of entry. They are paying £9,000 per year fees for their three year course. Their starting salary of £20,000 (roughly the average for a graduate) with an annual increase of £1,000 for the next 29 years, gives a final salary of £49,000. Interest has not been considered for simplicity here, but doesn’t impact on the illustration.
Judging by this, the student with grants borrows less, pays back the same and has less written off. The only difference is that without grants the borrowed figure is higher, therefore the written off figure is also higher. The actual money paid back is the same – regardless.
As education professionals and influencers of tomorrow’s students we should (please) view the removal of maintenance grants for what it is: an unfortunate decision that we can only hope changes – but never as a barrier to young people. We want UK students to make the right choices about whether university is right for them and their future, so isn’t it only right that they are properly informed?
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