Higher Education Funding and Student Finance

Vince Cable Excerpts

Wednesday 8th December 2010 Written Statements

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I am today announcing further improvements to the proposed package of reforms to higher education funding and student finance in England.

Our proposed reforms were announced by the Minister for Universities and Science on 3 November. They will introduce a significantly fairer and more progressive new system in which no eligible student has to pay upfront fees, there is a better deal for students while they are studying, and a fairer system of repayments for those who have completed their studies and are realising the benefits of a university education.

Since that announcement, we have continued to discuss the proposals in detail with Members of Parliament, universities, students and other stakeholders. In the light of those discussions, we have decided to make three further enhancements to the package to ensure that the package is as progressive as we can make it for full-time students, while at the same time providing better support for part-time students.

First, the proposals announced on 3 November already make significant steps to improve the support available for part-time students. For the first time, eligible part-time students would qualify for loan support for their tuition costs on the same basis as full-time students. These changes have been welcomed by many as a critical measure in redressing long-standing discrimination against part-time students. However, discussion with the higher education sector has highlighted that the proposed threshold of 33% intensity for full loan entitlement may inadvertently deprive a significant number of learners from receiving support. We therefore propose that the level of intensity be reduced to 25%—that is, any eligible student studying for more than a quarter of their time will be eligible for full loan support for their tuition costs. This will better reflect the way that many part-time courses are structured.

Secondly, we have been keen to ensure that there is adequate protection for lower earning graduates in our new system. One critical component of this protection is the income threshold at which graduates start repaying, and the way that threshold is then uprated in future years. As announced on 3 November, that income threshold will be £21,000 as from 2016, compared with the current threshold of £15,000. Our modelling to date has assumed that that threshold should be uprated every five years in line with earnings. In order to give better protection for those on lower incomes, we now propose that the uprating should instead be made every year. Around a quarter of graduates will be better off in this new, more progressive regime than under the current regime.

Thirdly, we have reviewed the repayment position of students and graduates under the existing student finance system. The current income threshold for repayments was first announced by the previous Government in 2004, and has never since been uprated. The effect is that the value of that threshold has been declining with inflation, with graduates required to start paying at relatively lower levels of income. That is not fair to existing students and graduates. So we have decided that the £15,000 income threshold for those in the existing system should be uprated annually in line with inflation from 2012 to 2016.

These improvements further enhance a reform package which will put higher education funding and student finance on a sustainable footing, improve the quality and viability of our university system, offer more progressive support to those on lower incomes both while studying in higher education and when repaying as graduates, and contribute to paying down the deficit.