Bring loan repayment threshold back down to £21,000, says former universities minister

In a new paper for the Higher Education Policy Institute, David Willetts says red wall participation must go up – but that more, better-funded HE should not come at the expense of taxpayers

The former universities and science minister David Willetts has called for more participation in higher education, while arguing it should not be at the expense of the taxpayer.

In a new paper for the Higher Education Policy Institute (Hepi) – ‘Boosting higher education while cutting public spending (Hepi Report 142)’ – Willetts links widening participation to red wall votes, says the student loan repayment threshold should be reduced to £21,000 and defends BTecs.

“Higher education has fallen out of favour,” says Willetts, who was universities and science minister from 2010-2014 and is now president of the Resolution Foundation.

“But it boosts earnings, wellbeing and the prospects of people and areas left behind. Conservatives are increasingly worried that graduates are left wing but the Party’s problem is with young people more widely. The best way to tackle this problem is by helping them fulfil their aspirations – to own their home, get a decent job, and – yes – go to university.

“It is in the interests of students that universities are well funded. But that should not come at the expense of taxpayers. It is wrong that forecast loan write-offs have risen from 28% under the Coalition to 53% today. Too many graduates have the depressing experience of their student debt rising each year when they could be paying it off. That’s why I believe the repayment threshold should be brought back down to £21,000 saving £3 billion of public spending a year.

“Universities are crucial to levelling up and boosting earnings as well as delivering vocational training. That means breaking down old-fashioned assumptions about universities shaped by the long dominance of the Oxbridge model. Higher education comes in many forms. The so-called “bad” universities are very useful indeed in vocational training and applied research. They are anchor institutions boosting local economies across England – in Bolton, Bradford, and Sunderland as well as Oxford and Cambridge. New universities should be created in towns from Blackpool to Chatham. Universities are a great national asset. We should use them and build more of them.”

The main conclusions drawn by Willetts in the wide-ranging, 92-page report, which namechecks Aristotle, Thomas Hardy and Osama bin Laden, are:

  • The red wall seats have much lower participation, with fewer than 30% of school and college leavers going on to higher education – compared to 60% in affluent long-standing Tory seats.
  • Low levels of participation in higher education are holding back wages in the Tory red wall seats. For every 1 percentage point increase in the proportion of the working age population with higher education qualifications, median full-time earnings in a constituency rise on average by almost £5 per week (or over £250 per year).
  • More graduates in an area boosts the earnings of non-graduates.
  • Economies with liberal labour markets and high levels of flexibility tend to have slightly higher levels of participation. The UK’s participation rate is not the result of a centrally imposed target of 50% participation which has long since been abandoned, but the result of the choices of young people.
  • Graduates are not currently paying back enough of the cost of higher education. Forecast write-offs of student loans in England have risen to 53% due to “the mistaken decision to raise the repayment threshold to £25,00 and index it thereafter”. Reducing the repayment threshold to £21,000, including for graduates who have recently graduated, would save £3 billion per year and reduce the number of graduates who see their graduate debt rising each year.
  • There should be a quinquennial review of the levels of fees and loans so they can be recalibrated as the labour market and the economy change.
  • The government should make it easier for universities to communicate with their graduates. And universities should have the opportunity of taking a stake in the debt of their own graduates so they gain if their graduates’ earnings rise.
  • The social backgrounds of degree apprentices are higher than for university students – higher level apprentices were more white, more male, less likely to be disabled and less likely to be from a deprived area compared with mainstream students doing a similar subject. Social barriers to apprenticeships may be one reason why disadvantaged groups have rapidly increasing levels of participation in higher education which has more diverse and open recruitment.
  • There is no battle between FE and HE. FE colleges are a crucial route to higher education and can also deliver it themselves, usually in courses validated by a university.
  • Driving students to do T-levels and enforcing a binary divide between academic and vocational courses at the age of 16 is a mistake. BTecs straddle that divide and are popular with 250,000 students doing them every year. It would be “a great error to remove funding for them” – Willetts recommends the Skills Bill requires consultation with employer representatives before any such qualifications lose their funding.
  • Mature students are more averse to loans than younger students, so the take up of the four-year Lifelong Loan Entitlement will be greatest among younger students. This is an opportunity to move to four-year degrees.

Willetts’ report has drawn mixed reviews from the University and College Union (UCU):

“Lord Willetts, as the architect of £9k tuition fees, cannot claim to be concerned about the high levels of student debt while simultaneously proposing to hit lower-earning graduates with debt repayments,” said UCU general secretary, Jo Grady.

“Lowering the repayment threshold to £21k, which is well below the average wage, will be a millstone around the neck of young graduates and risks putting students off from getting the education they need. It also fails to address the systemic problems with the university funding model which has led to rampant job insecurity and a precipitous decline in part-time and mature study.

“The Covid pandemic has shown the dangers of a university system based on competition, markets and debt, with many institutions prioritising fees over health and safety. Instead of burdening more students with debt, we should be looking at proper public funding to ensure that both further and higher education are accessible to all.

“Willetts is right, however, to defend BTecs and the government needs to keep them and stop creating false divides between vocational and academic courses – it is not about one or the other, but proper investment in both.”

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