WEEKEND READING: Between a rock, a hard place, and student debt

This blog was kindly authored by Dr Farhana Ghaffar, Leverhulme Early Career Fellowship Grant Holder, University of Nottingham BSKY | Website and Dr Rita Hordósy, Associate Professor in Education, University of Nottingham BSKY | Website

…I had a lot of reassurance from older family members … encouraging me to think of it more like a tax that I would pay in the future. And at that age, even though I was working, it was like zero-hours hospitality student jobs, I wasn’t paying tax apart from National Insurance, so I didn’t really have any concept I think of how it would impact me practically because I had nothing to compare it to.”

– Anna, graduate

Many graduates – who were teenagers when they first took on their student debt post-2012 – find themselves managing their loan repayments in the context of ever-growing personal financial responsibilities, stagnating graduate wages and a cost-of-living crisis. Our ongoing longitudinal research projects track the everyday experiences of graduates from the first cohorts of the post-2012 tuition fee regime, revealing how they are grappling with the unfolding flaws and inequalities of the English (and Welsh) higher education funding system.

Graduate perspectives: then…

As we previously discussed in a paper on experiences of indebtedness, some students in the second cohort of the post-2012 tuition fee regime viewed their student debt throughout their university years as a source of immediate financial concern. They either drew on familial funds or minimised their student loans through staying local and earning while learning.  However, the majority – in line with the prevailing policy narrative – conceptualised their student loans as an ‘investment’ into their future. The guidance on student debt / loans available to students was viewed as a lottery. Whilst some received no or little advice, for others like Anna, it was promoted as a ‘good’ debt: one relatively free from risk in relation to credit ratings and obtaining a future mortgage. Crucially, the debt was not seen as ‘real’, rendered seemingly invisible by direct transfers of tuition fees to their institutions and expected to remain mostly invisible in the future by repayments being automatically ‘taken out’ of their pay packets once in work. Overall, students felt powerless about their (lack of) choices if wanting to attend university – as they planned for a few years – and signed up for a life of student loan repayments.

…and now

Drawing both on Farhana’s research on intergenerational economies of student debt and Rita’s longitudinal project on graduate experiences, we show how ten years on from starting university, graduates’ powerlessness is compounded with anger towards a tuition fee and student loan regime that has proved problematic on multiple fronts. This includes anger over intergenerational inequalities; post-implementation changes to the terms and conditions; as well as the reality of the repayment regimes that do not facilitate their debt being paid off. Finally, graduates also critique the tuition fee regime as having a detrimental impact on the very institutions that awarded them their degrees.

First, graduates situate their lives in debt within broader intergenerational and social inequalities. They talk about having been born only a few years too late to attend under the lower, post-2006 regime, as well as their parents’ generation (and indeed the architects of the tuition fee system) attending university for free or paying much less in fees. Graduates also felt the injustice of wealthier peers bypassing the financial and emotional burden of student debt by drawing on familial funds to pay for university up-front, as Hannah Rolley discussed recently in a HEPI blog.When comparing their experiences with students after them, they recognise how the substantive maintenance grant and scholarship provision they received dwindled after the initial policy concern over debt-aversion eased. As Holly, a graduate of the 2013 cohort posed a key question,

I don’t agree that they got rid of the grants. (…) I don’t know what I would have done if I was 18 now. (…) Coming from here, I’m from a working-class background knowing no one that went to uni. I know what it did for me to go to uni, but would I recommend an 18-year-old to do the same?

Second, graduates discuss what they perceive as policy betrayal over the loan system and changing repayment conditions. As Natasha commented,

the government just obliterated one of the key rules of contract law [with changing the system], how do they get away with doing that?

The fear of any further retrospective changes created not only a sense of political apathy amongst graduates, but a lack of engagement with their student loans, with many deliberately avoiding looking at their statements.  For those earning above the threshold, monthly loan repayments, automatically deducted from their payslips, were harder to ignore, with many graduates pointing to ever-tighter budgets in the wider context of the cost-of-living crisis and increased personal financial responsibilities such as mortgage payments and child-care costs.   

This financial squeeze impacts decision-making over further studies, especially given that postgraduate loans in England and Wales are repaid above and beyond undergraduate loans and kick in at a lower earnings threshold. As Lauren said in our interview,

the level that you have to pay back a master’s loan is criminal, to be honest, especially now when tax thresholds are frozen, minimum wage has gone up, the whole cost of living is significantly higher.

Martin Lewis’ suggestion that graduates see their debt as an extra tax is certainly how most understand it, given they do not anticipate paying it back in full before it gets written off after 30 years. However, with even higher earners paying only the interest rather than the ‘sticker price’ they borrowed after 6-7 years in the labour market.

it feels a little bit like Monopoly money”

– Megan

just ever growing and you can’t get ahead of it”

– Sally

Finally, graduates who maintained or renewed links with the university sector also recognise that the funding system is not fit for purpose. They recognised that their tuition fees paid for their teaching and supervision, buildings and support provision, as well as the time and space to explore a range of graduate futures. However, they also point critically to precarious university finances, academics’ job security, and the extortionate amount international students are charged to cross-subsidise home-students’ teaching and research, as James discussed:

We were told, oh, “you’re paying tuition fees”, you know, “this is going to grow everything”, you know, “there’s more opportunity”. And instead, I’m doing a master’s and all of the faculty – whilst amazing and wanting to be there to teach you -, are under the yoke of this massive weight that everything is in debt, their jobs are suspect. If they leave, someone else will come in and fill their place for less money under more strenuous working conditions.

Where next?

After a decade of near silence, there is now a spotlight on the injustices of the student loan system experienced by Plan 2 graduates. Indeed, a Treasury Committee review into student loans affordability was announced recently, focusing narrowly on interest rates, changing terms and conditions, and broader fiscal policy. However, the funding system’s failings are felt keenly not just by graduates, but more broadly across universities, with more and more institutions posting deficits, and haemorrhaging academic and professional services staff (just look at the HE Shrinking log for the scale of turbulence). As for the taxpayer, by the late 2040s, the Government forecasts the value of outstanding loans will reach £500 billion, with only a third of students on Plan 2 student loans to be expected in full. To date, we have seen five distinct student loans plans and a postgraduate loan, each featuring a unique set of repayment terms and conditions for associated cohorts of graduates across the four home countries. As the debate around the future of the graduate repayment system intensifies, the question remains: if the tuition fee system is failing universities and student loans are failing students, graduates and the taxpayer, should we reconsider the public good of higher education and fund it publicly?