Despite the competing political stories around, the publication of the Augar review on post-18 education is already leading to acres of coverage and commentary.
At HEPI, we have published an initial response, judged the recommendations against our original submission to the review and looked specifically at the parts of the report that focus on widening participation.
Here, we look at 10 important points in the Augar review that stand out to us, including many that have not yet received much attention.
Disclaimer: As we are still working our way through the documentation, I may amend this blog as we learn more.
- Not recommending the CPI measure of inflation for revaluing student loans. This is easy to explain but hard to defend. The Government uses the CPI measure of inflation, which is relatively low, when giving money out (for things like benefit increases), and RPI, which is relatively high, when charging people. Both practices aid the public finances and relieve the pressure on taxpayers, but the Office for National Statistics and others have been very clear that RPI should not be used for public policy. They say: ‘Our position on the RPI is clear: we do not think it is a good measure of inflation and discourage its use. There are other, better measures available and any use of RPI over these far superior alternatives should be closely scrutinised.’ So this is one of the smaller-but-less-defensible parts of the Augar report.
- No real interest while studying. The removal of real interest during the period of study would remove a problem, which is that people are often shocked by the size of their outstanding total loan on graduation. They have a rough idea of how much they have borrowed but little idea of how fast it has been growing while they have been studying. So the proposed new tweak makes sense if it makes it easier to explain the loan system. But, and it is a big but, this tweak is a regressive move. It does nothing to help the poorest graduates because the amount of interest added to someone’s loan is only a material factor if they are ever likely to get close to repaying the loan off (otherwise taxpayers pick up the tab). A lower interest rate while studying means well-off graduates will extinguish their loan slightly more quickly.
- Extending loan repayment terms. The decision to extend the student loan repayment period to 40 years is bold (though this is still a shorter period than it could be – in Australia, loans remain outstanding until death and some people there have argued they should then be added to a deceased person’s estate). There is some evidence that students want to repay their loans off more quickly rather than more slowly but that could happen too as result of Augar: there is a small decrease in the repayment threshold and no interest while studying, plus smaller debts as a result of lower tuition loans and the reintroduction of maintenance grants for some. Whatever the pros and cons and precise impact of all these changes, given recent increases in life expectancy, the fact that people are working till they are older and concerns about the large debt write-offs, the increase to 40 years may makes sense – even if it is far from guaranteed to be popular. The politically astute Richard Brabner of the UPP Foundation has today tweeted: ‘changes to the fee level and repayment rate will increase the amount graduates pay back per month. Do Tories really want to go into an election promising higher taxes on young grads?’ The longer repayment term shifts this element of the loan system to become more like an income tax, as more people will be paying back for all or nearly all their working years.
- The return of maintenance grants. This is both overdue and very welcome. Under Tony Blair, Labour abolished maintenance grants, then regretted it and reversed the decision. Now, as many predicted, the Conservatives’ decision to remove maintenance grants for a second time also looks set to be reversed. I strongly welcome this, as will many others. This is not because I expect a big behavioural response – there was no big drop off in applications from more disadvantaged people when grants disappeared. But, morally, the current system, which assumes the poorest entrants should emerge with the biggest debts, is indefensible. The best models of student finance are not perfect technocratic creations; they also reflect society’s wider mores.
- Repayment tweaks to help the rich-but-not-very-rich. A new graduate who moves straight into a really well-paid job can pay off even a large student loan fairly swiftly, meaning they do not get hit particularly hard by the real rate of interest, which is set at 3% above inflation for the highest earners. The figure of 3% was originally chosen so that some graduates who do exceptionally well financially pay a little more than the cost of their education back into the system. But others who also do well financially take longer to get there. A medical specialist, for example, who might spend years in training can end up paying back a lot more back than other high-earning graduates. This is because the interest on their loans adds more to the total, meaning it takes longer before their loan is extinguished. There is a proposed tweak in the Augar report, which means no one would pay back more than 1.2 times what they borrowed. This is a clever way to ensure that no graduate is financially penalised much more than others while retaining the original feature that some better-off graduates will repay more than they borrow, building in some redistribution. It is a fiddly mechanism to resolve a real problem, but it may find little favour among those who want a graduate tax. They typically want more – not less – redistribution from rich to poor in the system.
- The impact outside England. The Augar report is a report about England, but England makes up such a large part of the UK in terms of population and spending that there are bound to be knock-on consequences for the other parts of the UK. Some of these could feel positive to those setting policy for Scotland, Wales and Northern Ireland, as they get more money to spend when spending in England rises. But there could be big rows brewing too. In Wales, Labour and the Lib Dems have recently raised fees to £9,000. They have been careful to ensure fees have remained slightly lower than in England, where the fee cap is currently £9,250. If fees in England now fall to £7,500, Welsh policymakers may need to change their flagship higher education policy in big ways, even though it has only been in place since the start of the current academic year. If they don’t, then the only part of the UK where Labour is in government will have the highest fees in the UK despite the official Labour Party policy being the abolition of all fees. Moreover, if £3,000 maintenance grants come back for students from households on less than £25,000 a year, as the Augar panel recommend, then this will be more generous than the bursaries currently available in Scotland, which may put a different gloss on Scotland’s so-called ‘free’ higher education.
- What is missing is as important as what is included.The Augar review has nothing of substance to say about international students and little on postgraduates. Yet anyone running or governing a big university spends as much time thinking about these areas as they do about home undergraduates. The finances of many universities (not to mention the diversity they embody) are, for example, particularly dependent on a healthy flow of international students. Hits to things like home undergraduate funding can be ameliorated somewhat in many instances by increasing the number of international students, so the silence on such issues will be painful for some in the sector to bear. When it comes to higher education, the focus of the report is also on traditional universities rather than so-called alternative providers, which is likely to be incredibly frustrating to those running successful independent providers – see this early tweet from Independent HE.
- Less education, or more education?It is not entirely clear if the Augar panel wants more education or less education – for example, they clearly value education but also seem to want more students to reject Level 6 (full honours degrees) for shorter and lower-level Level 4 and 5 options. This is because they believe graduates are often in ‘non-graduate jobs’ and because they think some sub-degree provision may provide a better match for some employers’ needs. Accepting this means accepting that it would be better to have a reduction in overall education levels, which it is difficult for many people working anywhere in the education sector to accept. Personally, I am a little sceptical that a high proportion of school leavers will switch their sights from three-year offerings to two-year offerings because the lure of the traditional university experience is very strong. Moreover, at the launch of the report this morning, we were told that changes like the reduction in fees and the reintroduction of maintenance grants could make the attractiveness of the regular university experience greater for some people in disadvantaged households.
- Write off costs.The sharp reduction in student loan write-off costs (the so-called RAB charge) brings the cost of each £ loaned out back down from its current level of around 45p in each £1. Given that it was the big increase to 45p encouraged by Theresa May’s increase in the student loan repayment threshold to £25,000 that triggered the Office for National Statistics’ decision to include the RAB charge in the national deficit, by rights the ONS should now revert to the status quo ante. Sadly, this is unlikely even though the ONS’s position, oddly, is to put the costs of higher education into the country’s spending figures without netting off any of the financial benefits of having a better educated workforce.
- Names may not matter. The report recommends renaming the student loan system the Student Contribution System. This is comparable with our recommendation last year to move away from the language of ‘fees’ and ‘loans’ by renaming ‘tuition fees’ as ‘student fees’. However, this ship may have sailed. In a blog for HEPI last year, the former Education Correspondent and Deputy Political Editor of the Sunday Times, Jack Grimston, wrote about: ‘the regular attempt to rebrand fees as graduate contributions. I tried this on a News Editor years ago after being badgered by various contacts. News editors have good nonsense detectors and this one asked me what of substance had changed to justify the new label. The sheepish answer was “nothing”. It is a reminder that often when a message is not getting across, it is the substance that needs looking at, the spin cannot always take the strain.’