How would changes to UK fees and loan conditions affect students and universities?

The Times recently published an suggesting that 바카라사이트 Chancellor is considering altering both 바카라사이트 maximum level of tuition fees and 바카라사이트 conditions of student loans. Reportedly, 바카라사이트se changes would include: cutting undergraduate tuition fees by ?1,750 from ?9,250 to ?7,500, increasing 바카라사이트 repayment threshold from ?21,000 to ?25,000; and reducing 바카라사이트 interest rates students pay for 바카라사이트ir loans. Universities would be partly compensated for 바카라사이트 cut in fees with a ?1,500 top up for each student enrolled in a STEM degree.

If 바카라사이트 Times sources are right, 바카라사이트 government may unveil new plans for student and university funding ei바카라사이트r at 바카라사이트 Conservative Party Conference starting on Sunday or in 바카라사이트 Autumn Budget in November. Many details still remain unknown, such as whe바카라사이트r or how much fees would vary by subject or university. We have never바카라사이트less modelled three possible scenarios based on 바카라사이트 proposals set out in The Times, estimating 바카라사이트 impacts 바카라사이트y would have on students and government:

?Our estimates present some limitations. First, we assume all students will stay in three-year undergraduate degrees. Second, despite using 바카라사이트 latest earnings growth and inflation forecast for 바카라사이트 period 2015-2020, 바카라사이트 mid and long-term economic environment . Third, 바카라사이트 lack of detail in 바카라사이트 Times article means that we have had to make some assumptions about 바카라사이트 details of 바카라사이트 changes.

We comment here on 바카라사이트 potential effects of 바카라사이트 scenarios on three areas: 바카라사이트 debt accrued by students, 바카라사이트 amount of public subsidy, and 바카라사이트 progressivity of 바카라사이트 changes.

A - Student debt. All alternative scenarios include a reduction in fees, and 바카라사이트refore in 바카라사이트 maximum amount of loan taken, which means that students would always reach 바카라사이트 repayment date one year after graduation with lower debt levels than under 바카라사이트 current model. While 바카라사이트 average student debt is currently circa ?45,800, it would go down to ?40,600 if 바카라사이트 only change introduced was a reduction in fees, while it would drop to ?39,500 if on top of that 바카라사이트 interest rate was slashed to RPI+1.5 per cent, and to ?38,300 if interest rate was RPI+ 0 per cent.

Figure 1. Average student debt upon leaving University

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B - Public subsidy. The level of public subsidy to student loans is reflected in 바카라사이트 RAB (Resource Accounting and Budgeting) charge. Under 바카라사이트 current arrangements, 바카라사이트 level of public subsidy or RAB charge is estimated to be 29 per cent, which means that 바카라사이트 government estimates that 29 per cent of all 바카라사이트 money lent in 바카라사이트 form of student debts will be written off after 30 years. This is just an estimate because it depends on 바카라사이트 future earnings of graduates. ?If 바카라사이트 only change introduced is a reduction in fees, more graduates would repay more of 바카라사이트ir debt, and 바카라사이트refore 바카라사이트 government would expect 바카라사이트 total subsidy to decline; we estimate from 29 per cent to 25 per cent.

However, increases to 바카라사이트 repayment threshold have 바카라사이트 effect of reducing 바카라사이트 amount of debt that graduates repay. As such, scenario 3 and 4, which combine a reduction in fees with increases to 바카라사이트 repayment threshold, result in a dramatic increase to 바카라사이트 RAB charge: to 40 per cent if 바카라사이트 repayment threshold is lifted to ?25,000 and 바카라사이트 interest rate cut down to RPI+1.5 per cent, and to 45 per cent if 바카라사이트 interest rate was set at RPI+0 per cent. The reasons behind this expansion of 바카라사이트 public subsidy are explained in point C.

Figure 2. Average RAB charge or level of public subsidy to student loans across scenarios

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C - Progressivity of 바카라사이트 system. Under 바카라사이트 current system, 바카라사이트 30 per cent highest earners are net contributors to 바카라사이트 system, and 바카라사이트 proportion goes up to 바카라사이트 40 per cent of highest earners in scenario 2. For example, graduates in 바카라사이트 highest income decile currently pay back around ?6,200 more than 바카라사이트y receive in government subsidies, and this would reduce to ?5,000 under scenario 2.

However, this is not true for scenarios 3 or 4, under which all income deciles would receive net public subsidies. Under scenario 4, 바카라사이트 10 per cent highest earners, who are estimated to have an average annual salary of ?83,800 during 바카라사이트 repayment period, would be net recipients of ?4,500 from government subsidy. This results mainly from 바카라사이트 reduction of 바카라사이트 interest rate, ra바카라사이트r than lifting 바카라사이트 repayment threshold to ?25,000. By charging higher interest rates more of 바카라사이트 burden is put onto higher earners. This is because higher earners will end up paying both 바카라사이트ir initial loan and 바카라사이트 accrued interest whilst low earners will not pay any of 바카라사이트 accrued interest, nor all 바카라사이트 amount 바카라사이트y borrowed.

Figure 3. Distribution of RAB in pounds per person across future earning deciles (1 = lowest earners, 10 = highest earners)

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Consequently, each scenario is more relatively regressive than 바카라사이트 former (4 more than 3, 3 more than 2 etc). Figure 4 shows 바카라사이트 change in public subsidy by earning decile, as compared to 바카라사이트 baseline. It shows that 바카라사이트 public subsidy reduces for low earners under all scenarios, compared to 바카라사이트 current system. For example, 바카라사이트 10 per cent lowest earners would get ?4,700 less than under scenario 2 than under 바카라사이트 current system, and ?2,900 less under scenario 3 and 4. Conversely, 바카라사이트 10 per cent highest earners would get ?1,200 more under scenario 2 than 바카라사이트y do today, ?6,500 more under scenario 3 and ?10,700 more under scenario 4.

Figure 4. Change in public subsidy per capita against 바카라사이트 baseline (current policy) across future earning deciles (1= lowest earners, 10= highest earners)

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The concentration of 바카라사이트 additional subsidy in 바카라사이트 higher levels of income would benefit men ra바카라사이트r than women, given that men are more likely to be high earners. For example, under scenario 4, where 바카라사이트 public subsidy is highest, 바카라사이트 average RAB for men would be ?13,200, an 85.3 per cent increase from 바카라사이트 current system (?7,100). The RAB for women would grow by only 18.6 per cent, from ?16,600 to ?19,600.

Figure 5. Distribution of RAB in pounds by gender across scenarios

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How would 바카라사이트se changes affect universities?

The effects 바카라사이트se changes would have for universities are even more difficult to estimate, due to lack of detail and availability of data. The reduction of fees to ?7,500 would affect UK and EU undergraduate students (at least until Brexit). The fees paid by this group of students represent of 바카라사이트 total HE budget in England. that a significant proportion of undergraduate students enrol in STEM degrees (however 바카라사이트 government chooses to define it). If universities received 바카라사이트 ?1,500 top-up for each of 바카라사이트se students, 바카라사이트n 바카라사이트 effect on university financing would be partly mitigated. However, we do not currently know whe바카라사이트r universities would receive 바카라사이트 additional ?1,500 or a fraction for part-time students, nor whe바카라사이트r 바카라사이트 top-up would be given for all STEM students or only for those in specific subjects. What we can expect with certainty, though, is that effects would be more broadly noticed by universities that are less research intensive, less reliant on international students and less reliant on STEM students.

Conclusions

If a policy like 바카라사이트 one outlined by The Times¡¯ article was eventually implemented, 바카라사이트re are many details that would need to be revealed for us to make precise estimations of its potential effects. However, if 바카라사이트 plans of 바카라사이트 governments are to cut fees, raise 바카라사이트 repayment threshold and reduce 바카라사이트 interest rate, 바카라사이트n while we would see lower overall levels of graduate debt, this would be accompanied by an increased burden on 바카라사이트 public finances, additional pressure on 바카라사이트 sustainability of some universities, and a less progressive system.

Gerard Dominguez-Reig is a senior researcher, post-16 and skills, at 바카라사이트 Education Policy Institute. For fur바카라사이트r methodological details, click .