How to halve richest-poorest student debt gap – at no extra cost

A more progressive student loan repayment system would cut the gap in debt between England’s poorest and richest graduates, and come at no additional cost to the Exchequer, according to new research.

The Sutton Trust’s report finds that since the abolition of maintenance grants in England, students from lower-income backgrounds have been leaving university with the highest levels of debt.

New analysis by London Economics for the non-profit organisation estimates that poorer students could graduate with £60,100 of debt, 38 per cent more than those from wealthier families – mostly because of the need to take out maintenance loans.

The Sutton Trust says these students are also less able to rely on family members for support, and are struggling to cover basic living costs, because loans have not kept pace with rocketing inflation.

Essential costs were found to be higher than the maximum available loan for 57 per cent of students, while for 19 per cent, housing costs alone are higher than the available loan.

In addition, eligibility for maintenance loans is also shrinking because parental income thresholds have also remained frozen at £25,000.

The report estimates this “locked out” an estimated 30,000 students starting university last autumn from taking out the maximum level of support, putting more pressure on themselves and their families. 

Sir Peter Lampl, founder of the Sutton Trust, said it was “outrageous” that the poorest students are racking up the highest levels of debt.

“These students are the most debt-averse, so under the current system this increasingly deters them from going to university,” he said.

“All political parties must commit to reintroducing maintenance grants, and overall levels of maintenance should be increased, so that students can meet their basic needs without graduating with excessive debt. There’s absolutely no excuse for failing to create a fairer system.”

The Sutton Trust recommends the reintroduction of maintenance grants for poorer students in England to reduce debt and better align with the approach in the rest of the UK, an increase in the overall amount of maintenance funding available, and increasing the parental income threshold.

It also calls for changes to repayment terms to make the system more progressive, with lower overall repayments for lower income graduates, and higher payments for higher earners in the long term.

Under the proposals, monthly repayments would reduce, meaning an effective “tax cut” for all graduates in terms of their monthly outgoings on graduation.

The report finds that this would halve the gap in debt between the poorest and richest graduates and would come at no additional cost to the Exchequer.

Dame Sally Mapstone, president of Universities UK, said universities have stepped up efforts to alleviate financial pressures during the cost-of-living crisis, but it is imperative that the maintenance support package is reviewed to reflect recent rates of inflation.

“Without action, we run the risk of deterring disadvantaged students from attending university due to financial pressures,” added Dame Sally, who is also principal of the University of St Andrews.

“We want to prioritise reinstating maintenance grants for those who need them most and to uprate maintenance loans to reflect real rates of inflation and changes to household incomes to ensure future students have the same opportunities as those of the last decade.”

With the modelling by London Economics showing there are options to deliver a different system of student maintenance at no additional cost to the taxpayer, Vanessa Wilson, chief executive of University Alliance, said the Sutton Trust are right to say that there is no excuse for not acting.

“Current levels of student maintenance have become inadequate in ensuring the poorest students’ living costs are covered during their studies. Whilst universities and students’ unions have been doing their bit to increase hardship funding and wellbeing support, there is now such a level of need that it requires policy action from government."

patrick.jack@timeshighereducation.com