The 10th November saw the first public protests against the new British government since it came into power in May. The protest was against the changes to tuition fees that are due to come in for those starting higher education courses in 2012 and beyond. An estimated fifty thousand people took to the streets of London in a protest that was marred by violence as the Conservative Party Headquarters was stormed, banners were set on fire and missiles were thrown.

So what is the new scheme for funding higher education and how will it work? Currently the maximum that universities are allowed to charge in tuition fees is £3,290 per year, but this cap is going to rise to £9,000. Some were predicting the cap will be removed altogether but this has not been the case and those who charge over £6,000 a year will have to take measures to encourage poorer student to attend their courses. The government has claimed that they can only charge more than £6,000 in ‘exceptional circumstances’.

The loan scheme will continue in a similar way as it currently does in terms of former students paying back 9% of what they earn over a threshold until they re-pay their loan. The threshold is being raised though, meaning former student who earn less will benefit. At present those earning over £15,000 a year have to pay 9% of their earnings above this amount, but this will be raised to £21,000. This means those who earn £20,000, for example, will not pay anything, saving them £450 compared with former students at present. Whatever the income of a former student they will be paying less than they currently do per year but will need to pay it back for longer because of the higher tuition fees and the decrease in yearly payments.

Here is a comparison comparing the current and the new systems for students borrowing the amount of the maximum tuition fees (but not including other loans such as those for living costs) who earn the national average of £24,000 a year:

Under the current system those with an annual income of £24,000 pay back £810 per year, but it future this will only be a third of that at £270 a year. This means former students under the current system are worse off than they would be under the future system. However, it will take longer to pay back. Using this same example it would take 12 years to pay back a total loan of £9,870 (£3,290 for three years) but under the future system of paying less per year and more in total it would in theory take 100 years to pay it back, more than double the average working life. In reality this will not be the case though as the loan is written off after 30 years, meaning those earning £24,000 for the duration of these 30 years (although salaries do rise over time) would only pay back £8,100, which is less than the current tuition fees.

There has been much debate as to the merits of the new system, something that is likely to continue for some time. It is generally accepted that students should contribute towards their education but opinions differ as to how they should contribute and how much. Depending on students’ future income the future system will mean some are better off while others are worse off. Those who earn under £25,000 a year throughout their lifetime will be better off under the new system, while those earning more will still pay back less per year but will be paying for longer and more in total. To pay back the full amount under the new system former student will have to earn around £32,000. The majority of former students will eventually pay more under the future system but it will be spread out over a longer period so it may have less of a direct impact due to the smaller monthly payments.

Andrew Marshall (c)