Augar review: return of maintenance grants and loan shake-up urged

The review of post-18 education funding in England has recommended the return of maintenance grants for the poorest students, alongside a shake-up of the student loan system designed to boost the repayments of loans.

The review, led by Philip Augar and published on 30 May, calls for students from the most disadvantaged backgrounds to be entitled to a minimum grant of £3,000 to help cover their living costs.

The report says that the continuing gap in entry rates between the richest and poorest students “partly arises from the fact that it is the disadvantaged who are most likely to be deterred by loans”. Critics have pointed out that this group has also ended up borrowing the most in student loans, after maintenance grants for the most disadvantaged were replaced by access to additional loans in 2016.  

Combined with the proposal to cap tuition fees at £7,500, it would mean the maximum debt for a disadvantaged student would decrease from £60,000 to £45,000.

While the exact amount of grant would be determined by the government, the panel envisages a sliding scale of grant eligibility alongside a sliding scale of continuing loan access, with explicit recognition that parents of students from all but the poorest background will be expected to make a contribution.

The total amount of maintenance funding – from grants, loans and parents – should be tied to the national minimum wage for 21- to 24-year-olds, on the basis of 37.5 hours per week, 30 weeks a year, the panel says. This is currently about £8,700, slightly lower than the maximum maintenance loan currently available.

On loans, the report says that income contingent loans remain the fairest way to collect students’ contributions towards higher education, but expresses concern that 70 per cent of borrowers will not pay back their full loan within the 30-year payment period, and 45 per cent of the value of loans will be written off, and covered by the government.

The review therefore recommends extending the payment to 40 years, covering graduates’ fifties, when they are likely to be earning more. “We believe borrowers should continue to repay their loan for as long as they benefit,” the report says.

The report also recommends that the repayment salary threshold – currently £25,000 – should be reduced to the level of median non-graduate earnings. Since the changes would not come into force until 2021-22, the threshold is likely to stay roughly the same that year, but should then continue to rise in line with average earnings.

The report also recommends that interest charged on loans while students are still studying should be tied to inflation only, not inflation plus 3 per cent as is the case currently.

However, the report rejects suggestions that the additional 3 per cent should also be removed post-graduation, arguing that it would be “imprudent and wasteful” for the government to provide “entirely costless finance”.

A final recommendation – which, uniquely, could apply to existing borrowers – would cap repayments at 1.2 times the initial loan amount in real terms, which should be applied to current borrowers. It would mean that those who earn less, such as teachers and civil servants, would not end up paying back higher loans than those immediate high earners who pay back their loans quicker and so incur less interest.

Taken together, the changes would mean that about 70 per cent of the value of loans were paid off, the panel says. However, the reintroduction of grants means that the total public contribution would remain at around 50 per cent.

The review also recommends new language for the system to make it clearer how the system works. Referring to it as a “student contribution system” would reduce the focus on debt, and this is justified since much borrowing is written off, the report says.

anna.mckie@timeshighereducation.com