September 20, 2013 6:12 pm

Degrees of hardship for students

By Elaine Moore

University bars are in trouble. Student unions in Leeds, Edinburgh and Birmingham have all reported a dramatic fall in alcohol sales and other revenue. In Aberystwyth the situation is so dire that the student union bar has closed down. All agree on the reason: money worries. Now that England in particular is one of the most expensive places in the world to study for a degree, students no longer have the means nor inclination to socialise in bars. The way that higher education is funded in the UK has changed completely within a generation, as costs shift from the state to the student and the process isnt finished yet. Plans for students to contribute towards the cost of their education first gained traction in the 1990s as application numbers grew and universities complained of underfunding. When Labour came to power in 1997, it inherited a report commissioned by the Conservatives suggesting that students contribute about a quarter of the total cost. In spite of public protests and a backbench rebellion, means-tested tuition fees entered the statute book in 1998. Prices then began to rise. In 2004, top-up fees were introduced, increasing the annual charge from 1,125 to 3,000. Last year, the rules changed again, pushing up annual tuition fees in England to a maximum of 9,000,

following a review chaired by former BP chief executive Lord Browne. Each change has been deeply unpopular with certain groups. Top-up fees were passed in parliament with a margin of just five votes a narrower margin than the decision to go to war in Iraq. About 50,000 people are thought to have taken part in a 2010 protest against higher fees and the Liberal Democrats broken pledge not to raise tuition fees led to leader Nick Cleggsinfamous Im sorry video, which was then parodied in a remix and has been viewed more than 2.5m times. For students, the political fights pale next to the raw numbers. On top of a loan to cover the annual 9,000 tuition fees, many will take out a maintenance loan to help cover living costs of 5,500 a year, or 7,675 in London. Add in overdrafts and money from part-time work and the total bill for a degree could be 50,000 in three years.
UK universities

The FTs round-up of news from the sector

According to the National Union of Students, balancing loans and costs is proving tricky for many undergraduates. It estimates that about 3 per cent of students have taken out an expensive payday loan to meet costs. The University of Northampton has started a credit union on campus in an effort to help students find more affordable loans. Wray

Irwin, head of the universitys centre for employability, said he had found many students were getting into serious financial trouble as they tried to budget. Owen Burek, editor-in-chief of financial advice website savethestudent.org, says that on average, students spend 763 a month 300 more than by the maintenance loan. We know they have cut back on non-essential costs and that this is something thats a huge cause of stress at a time when they are trying to get a degree, he says. After the protests against fees achieved nothing, there is a feeling that its a slippery slope and fees could just keep on rising. Labour says that if it comes to power in 2015, it will reduce the fee cap to 6,000 a year, citing research showing that between 2010 and 2011 university applicationsfell by 9 per cent in England but continued to rise in Scotland, Wales and Northern Ireland, where university tuition is free or subsidised. The government would like students to think of tuition fee loans as a sort of graduate tax, and says they shouldnt put anyone off applying to university any more than a higher rate tax would put someone off a pay rise. Thats because under the income-contingent repayment terms, borrowers do not need to start repaying loans until they earn at least 21,000, after which they pay 9 per cent of their income. Anything left after 30 years is cancelled. AudioLloyds sell-off, university costs and manorial rights
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Nicholas Barr, professor of public economics at the London School of Economics, has long argued that the repayment threshold is too high, and that the existing system is stressful for students, who worry about the size of the debt, and is poor value for taxpayers, who will not see a return on their money for a long time. Because it is expensive to the state we still cap student numbers, which is insane, he says. If I had my way, the loans would be redesigned so the repayment threshold was lowered and the interest matched the cost of providing the loan. Privatising the loans could make sense if they were the right design. They could even be bought by pension funds. It would make sense pension funds want long-term assets andstudents need long-term loans. The UK loan system remains mostly state owned, unlike the US where the $1tn student loan market is big business for commercial lenders such as Wells Fargo, which lend directly to students. But Danny Byrne, rankings commentator at education research firm QS, points out that the loan terms in the US are less generous still and the costs far higher but that is offset for poorer students by the extensive availability of scholarships, endowments and other forms of financial aid. ------------------------------------------How to pay less international tuition fees compared

Ruprecht-Karls-Universitt Heidelberg, Germany. Annual student fees: undergraduate FREE; postgraduate FREE; international undergraduate FREE. Photo: Dreamstime
Dreamstime

University of Groningen, Netherlands. Annual student fees: undergraduate 1,300-2,600; postgraduate 1,300-2,600; international undergraduate 5,100-6,400 (2012 figures)
Dreamstime

ETH Zurich (Swiss Federal Institute of Technology), Switzerland. Annual student fees: undergraduate up to 1,300; postgraduate up to 1,300; international undergraduate up to 1,300
Dreamstime

University of Edinburgh, Scotland. Annual student fees: undergraduate 1,820; postgraduate 6,100; international undergraduate 13,500-17,500. Fee costs only apply to Scottish students
AFP

University of Cambridge, England. Annual student fees: undergraduate 9,000; postgraduate 5,968; international undergraduate 13,662-30,069
Bloomberg

Yale University, United States. Annual student fees: undergraduate 28,10029,400; postgraduate 21,700-23,000; international undergraduate 28,10029,400
Dreamstime

The University of Tokyo, Japan. Annual student fees: undergraduate 2,6003,800; postgraduate 2,600-3,800; international undergraduate 3,8005,100
Dreamstime

University of Hong Kong (HU). Annual student fees: undergraduate 5,1006,400; postgraduate 2,600-3,800; international undergraduate 8,90010,200 (2012 fee)
Dreamstime

National University of Singapore (NUS). Annual student fees: undergraduate 5,100-6,400; postgraduate 3,800-5,100; international undergraduate 7,700-8,900
Dreamstime

London School of Economics and Political Science (LSE), England. Annual student fees: undergraduate 8,500; postgraduate 11,112; international undergraduate 15,768
Getty

Next Thumbnails Germany rejects tuition fees As students in England face the highest tuition fees ever charged in the UK, undergraduates in Germany are breathing a sigh of relief. The countrys experiment with tuition fees is over after Bavaria, the last state to charge undergraduates, announced this month that it would abolish charges for state-run universities after 1.4m people voted against them a referendum. Germany has about 2.5m active students, a similar number to the UK, and universities were given the option to charge fees in 2005 to boost their budgets. Fees levied on students were never as large as those charged in the UK up to just 1,000 (840) a year but they nevertheless remained deeply unpopular with the general public, especially when states charging them found that

student enrolment numbers were not rising as quickly as they had before. Germanys decision means that all EU students, including those from the UK, can study there for free and UK students might want to note that many universities in Germany offer programmes taught in English. According to the European Commission there are nine countries that mostly do not charge anything for students from the EU: Cyprus, Denmark, Finland, Greece, Malta, Norway, Scotland, Sweden and Austria (which has also backtracked on the tuition fees it started charging in 2001). Some of these universities charge semester fees, but these tend to be just a few hundred euros. Some also offer courses in English. Within the UK, things are a little complicated depending on where you live, and where you study. Tuition at Scottish universities is free for Scottish and other EU students, but students from England, Wales and Northern Ireland must pay. Universities including Edinburgh and St Andrews have opted to charge the maximum of 9,000 a year. A legal challenge to stop the universities charging students from the rest of the UK failed earlier this year. Students from England, Wales and Scotland will pay up to 9,000 if they study in Northern Ireland, but Northern Irish students will pay only around 3,500. Fees in Wales are up to 9,000 but the devolved administration there will meet the costs for Welsh students, even if they study outside Wales.

Students from England who want to stay in their home country can find lower fees at a number of universities, including London Metropolitan University (6,982), Coventry University (7,238) and University College Birmingham (7,420). An undergraduate degree from the Open University generally costs 3,000 and the University of Buckingham, once one of the most expensive place to study in the UK because of its private status, offers two-year degree courses which will cost 23,920 in total less than a three-year course at a university charging 9,000 a year. -------------------------------------------

Case study: Kirsten Powley, 21, graduated in English Literature from the University of East Anglia this year My student debt (about 10,000) has put a stop to the life I expected I would have as a fully-fledged graduate. The prospect of renting my own flat or saving to buy a house is almost non-existent. I have even had to move home with my parents to reduce my living costs as much as possible. When I think about how much money I will earn (when I get a job!), I immediately think of how much of that will be going back into paying off my student debts. Despite the fact my student loan deductions wont come out until I earn a certain

amount, it is still a big source of stress that looms over me when I think about the future. -------------------------------------------

Case study: Hugh Hammond, 18, first year at Birmingham University, studying English At my age, knowing that Im about to go 9,000 into debt for tuition fees alone this year is pretty terrifying. Im going to try to stay out of debt as much as I can but well see what happens. One problem is that I didnt get into university accommodation, so Ive had to find somewhere off campus and the rents are really expensive Im paying 7,000 for the year which is well outside my budget. Ive applied for a maintenance grant and I have a pretty big overdraft with my student bank account and my sister has signed me up to discount websites such as topcashback, but one of my first plans when I get to university is to get a job. Im sure university will be a great experience and Ill just have to hope its worthwhile financially. ------------------------------------------Will the private sector buy student loans? Selling the UKs student loan book is, according to the FTs Martin Wolf, economic illiteracy. No private lender can borrow money at a lower rate than the government, so they

will be unwilling to offer more for it than it is worth to the government. In spite of this, momentum appears to be gathering behind the idea of reducing public debt by privatising student loans. By April 2013, outstanding loans totalled 46.5bn and in this years fiscal sustainability report, the Office for Budgetary Responsibility predicted that net debt from student loans will peak at 6.7 per cent of GDP in the 2030s.
Martin Wolf: How to free our universities to compete

The combination of financial responsibility for students with ideas of fairness has precluded what limited competition there might be among institutions...

Danny Alexander, chief secretary to the Treasury, has told parliament that the government plans to help restore public finances by selling off public assets from 2015 (an election year) and that 10bn of this would come from assets such as the student loan book. But finding a buyer willing to pay a good price could be difficult. Two tranches of old student loans worth about 1bn each have already been sold, in 1998 and 1999 and, because the interest rates charged were below market rate, the government agreed a subsidy for the buyer. Plans to sell the last remaining mortgage-style loans were announced in March.

The private sectors expertise makes it well-placed to collect this debt and the sale will also help the Student Loans Company to concentrate on providing loans to current students, says the Department for Business, Innovation and Skills. Selling newer loans could be more complicated, say economists. Not only are the interest rates charged on student loans still subsidised, but the loans are now incomecontingent, meaning that repayments are no longer fixed over a specific period, but are a percentage of the graduates salary.
Serious money

Elaine Moore: Are students the next big investment?

If the borrower never earns enough to repay their loan it will be written off entirely after 30 years. Professor Nicholas Barr at the London School of Economics predicts that about a fifth of loans will never be repaid in full. The Department for Business, Innovation and Skills says a tender has gone out for a feasibility study on incomecontingent loans, but it emerged recently that the Rothschild investment bank has already submitted ideas on ways to make the loan book look attractive, including raising interest rates retrospectively and underwriting loans with a synthetic hedge in which the government protects the buyer against possible low returns.

Any sale will also have to navigate public opinion. Taxpayers will want value for money and students will want reassurances that a private owner wont impose harsh terms. Plans to sell may not have been agreed or announced, but that hasnt stopped 13,000 people from signing a petition against the idea.