The government is “quietly tightening the financial screws on students, graduates and universities”, says the Institute for Fiscal Studies (IFS).
According to a new briefing from the economic research institute, the freezing in cash terms of the parental earnings threshold, of the student loan repayment threshold and of maximum tuition fees will “cause genuine hardship for students on tight budgets” and “add further pressure on universities”.
Analysing the government’s updated student finance guidance for the 2022–23 academic year, the IFS found that parental earnings thresholds have remained frozen in cash terms – the lower income threshold has been frozen at £25,000 since 2008. The IFS also highlights the fact that the rate at which the level of maintenance loans will be increased – 2.3% – falls short of both the current level of inflation and the level of inflation that can reasonably be expected during 2022/23.
“This means that many students will see their maintenance loans cut in real terms, even though the real value of their parents’ incomes will also have fallen”, says the briefing. Had the parental earnings threshold risen with average earnings, it calculates, it would now be around £34,000.
The IFS also reiterated its response to the announcement last month by higher and further education minister Michelle Donelan that the student loan repayment threshold would be frozen in cash terms – it called the freeze a “tax rise by stealth on graduates with middling earnings” and said the impact of it would become more significant if it endured beyond 2023.
Meanwhile, the freeze on maximum tuition fees for another year “hits universities and mainly benefits the taxpayer”, says the IFS. It explains that tuition fees have already been cut by 15% in real-terms over the past decade, as they have been frozen since 2017/18 and remain largely unchanged in cash terms since 2012, when they were £9,000.
The ongoing tuition fees freeze means “there will be further large cuts in real terms this academic year and next, given the high rate of inflation”. If maximum tuition fees were increased in line with inflation, says the IFS, they would need to be nearly £10,500 in 2022–23.
The extension of the freeze in maximum fees will add further pressure on universities, while only benefiting the highest-earning graduates – Ben Waltmann, IFS
“The government seems determined to use high inflation as a cover for reducing the taxpayer cost of student loans,” said Ben Waltmann, senior research economist at the IFS.
“Large real-terms cuts in maintenance loans could cause genuine hardship for students on tight budgets. A freeze in the repayment threshold mostly hits middle-earning graduates, whose budgets are already being squeezed by the rise in the cost of living, the freeze in the personal allowance and the hike in National Insurance. And the extension of the freeze in maximum fees will add further pressure on universities, while only benefiting the highest-earning graduates.”
Matt Western MP, Labour’s shadow universities minister, responding to the new IFS report, accused the government of using “a smokescreen to hammer students and graduates”.
A Department for Education spokesperson said: “Our student finance system was designed to ensure those from the poorest families get the most support whilst they study. Those students currently have access to the largest ever amounts of living costs support in cash terms and we have increased maximum loans for living costs over the last two years.
“The student loan system needs to be fairer for both students and the taxpayer. With graduate salaries rising it is only fair to ask borrowers who are benefitting financially from their higher education make a reasonable contribution towards its costs.
“We are also tackling dropout rates and improving graduate outcomes so that students get better value for money – especially those from disadvantaged backgrounds.”
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