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Were student loans designed by the rich to soak the poor?

  • 27 October 2017
  • By Nick Hillman

The wonderful human geographer Danny Dorling has expounded on his long-held view that our student finance system was designed by the rich to hammer the poor in a new essay for Wonkhe entitled ‘Why student loans are a confidence trick for the 85%‘. This claims student loans have been implemented by ‘con artists’ to ‘defraud’ disadvantaged people. Apparently, ‘The repayment system has been fixed to favour the rich by some of their number’.

Danny is brilliant at bringing Geography – especially the inequalities that plague the UK – alive. The last time I saw him speak was to an enormous sellout crowd at the Hay Literary Festival and it was so engaging and stimulating that he had the audience eating out of his hand the whole time. It was a perfect example of academic engagement and impact (albeit it to an overwhelmingly white, middle-class and educated audience).

But his argument that the fees and loans system we have results from the personal financial position of those who designed it is incredibly hard to sustain. Danny claims the arguments of those who support the student funding arrangements ‘are based on untruths and a desire among some, latent or otherwise, for our future society to be even more unequal.’ There are lots of criticisms that can be made of the funding system we have (including the fact that, since maintenance grants were abolished, the poorest students emerge with the biggest debts) as well as how it was put together and how it has been tinkered with in recent months / years.

Yet Danny’s central argument does not stand up for the reasons below. (I have left out the inconvenient fact that Danny, one of the country’s most successful academics, is presumably – like those he criticises – relatively wealthy compared to those on median incomes.)

1. Danny’s argument rests on the idea that the personal characteristics of policymakers determine their views and policies because they follow their own self interests. A quick glance at the large number of fairly wealthy people in senior positions in the Labour Party or at the historic phenomenon of working-class Toryism might quickly dispel this notion. It is also not true that all those who had a hand in (re)introducing tuition fees in 1998, tripling them in 2006 and tripling them again in 2012 were ‘rich’. When I think of those civil servants who crafted the technical details of the funding system we have, I find it hard to think of them as the tool of the wealthy soaking the poor, especially when the Institute for Fiscal Studies described the post-2012 £9,000 fees system as ‘substantially more progressive than its predecessor‘.

2. A second reason why it is facile to assume that the personal characteristics of policymakers determine their worldview is that it has been disproved time and time again. The idea that ‘the rich’ must govern for the rich and ‘the poor’ must govern for the poor is akin to the view that you have to be a scientist to be a good Science Minister, a pensioner to be a good Pensions Minister and a businessperson to be a good Business Minister. This is a widely and deeply held view, I know, but – often – the opposite turns out to be the case. For example, my old boss, David Willetts, is generally regarded as having been a good custodian of science policy – along with George Osborne. Yet, in both cases, their passion for science came late and partly resulted from an embarrassment that they had not studied it for longer themselves. It works the other way too. We can all name successful businesspeople brought in to shake up politics who walk away frustrated shaking their heads a few years later. (If you are struggling, recent names might include Archie Norman, Alan Sugar, Digby Jones etc.)

3. Far from being a mechanism for reinforcing inequality, income-contingent student loans rebalance things. For example, they reduce the amount that non-graduates contribute to the costs of others’ higher education while also protecting lower-paid graduates from covering the cost of their own provision. Most importantly, they have allowed the relaxation of student number controls. As the middle-classes are, understandably, reluctant to give up university places, expanding the sector is by far the best way to broaden access to higher education (and always has been). Focusing on the tripling of tuition fees while ignoring the much more important policy of removing student number controls that flowed directly from it, as Danny does, is to commit the sin of omission.

4. Anyone who doubts this should take a quick look at Chile. Danny mentions the country in his piece, but the latest situation there does not help his case. Chile is currently trying to move away from high tuition fees to a free system. They are finding it means limiting places, reducing funding for each student and forcing some universities that can to move further away from the state as a way of avoiding these shortcomings – it is a real triple whammy. But the Chilean experience does at least usefully tell us what would have happened if the 2017 Labour Party Manifesto commitment to abolish fees had been implemented.

5. The most common current problem facing students from tougher backgrounds is a lack of ready cash. The most plausible way to tackle this is to increase the amount of maintenance support they receive. That could increase the amount they owe once more (even were some form of maintenance grant to be reintroduced, as I would like to see). Yet Danny’s logic seems to be that ensuring poorer students have more money in order to pay their bus fares, join student societies and buy some new clothes is a wicked ploy dreamed up by the rich to keep poorer people in their place. In fact, it is more likely that it would provide the least well-off students with the necessary resources to stay the course and then, subsequently, to benefit financially and non-financially from having a degree.

A case can  be made for generous taxpayer funding of student support but we have not ended up with a different system because the rich want to soak the poor. We have ended up with a different system because, rightly or wrongly, governments / taxpayers / voters have limited resources, needed to rein in their spending when austerity hit and tend to prioritise other areas of spending, such as schools and hospitals, over the needs of universities.

If there is anything in Danny’s argument about rich and poor, it could be a different point. A few years ago, there was a successful series of self-help books labelled ‘Rich Dad, Poor Dad’. These purported to inform the non-rich of the secrets of the rich: in essence, they argued that most people work for money but rich people make money work for them – for example, by investing in the future.

If there is any truth in the argument that the student loan system was designed by rich people for others, it is easier to argue that it does this by providing generous and subsidised risk-free loans to people who may otherwise have proved more debt-averse in order that they can invest in their own long-term futures.

It should be possible even for those who wish we had a different student funding model to recognise this without feeling the need to impugn all those people who, over many years, have contributed to the design of the current one.

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