Not enough attention has been paid to the long-term effects of student loans, and their potential impact on everything from plummeting home ownership levels to the falling birth rate.
So says Dr John Cater, vice-chancellor of Edge Hill University.
“Throughout the last decade, whilst litres of printer ink have been devoted to headlines about fees, precious little has been written about the impact of the £9,000 fee and the shift from bursaries and grants to income-contingent loans on socio-economic behaviour,” he writes in a blog published today (15 February) by the Higher Education Policy Institute.
With more than half the population experiencing higher education by the age of 30 – numbers having doubled since 1992 – the impact of student loans will only grow in significance, says Cater.
On housing, for example, he argues that, despite graduates largely being deemed a low risk for mortgage providers, there is a deeper issue at play.
“Paying basic-rate income tax at 29 per cent (when the additional nine per cent repayment on earnings above £27,295 is factored in) has a significant impact on affordability,” he writes.
“The gap has become a chasm for many, with supply-side shortages contributing to inflation-busting house prices. It should be no surprise that home ownership rates are plummeting, particularly amongst those under the age of 35.”
Of equal import, says Cater, is the effect that the tax system may have on labour market behaviour.
In related new: Graduates in England face tuition loans ‘stealth’ tax – IFS
He contrasts two households with a gross income of £60,000 per year; one where the total is earned by a graduate employee, the other by a couple paid £30,000 apiece.
The latter will pay at least £7,000 less in income tax, national insurance, and student loan repayments and, unlike the graduate, also be entitled to child benefit.
“Job-sharing, fractional employment, and flexible working – all doubtless accelerated by COVID-19 – have a financial as well as a lifestyle benefit, whilst denuding the centres of towns and cities of activity,” writes Cater.
Finally, he notes that the UK birth rate has dropped in each of the past five years, with a concurrent shift towards people having children at a later age.
“It would, of course, be both naive and wrong to align all, or even most, of these societal changes with tuition fee and maintenance loan policies.
“But it would be equally wrong to presume they have no effect on individual behaviour; the impact of high levels of perceived debt shaping aspirations and, for some, their wellbeing and psychological health.”
Although the government has yet to offer a full response to the Augar report, Cater writes that “the most heavily trailed possibility, a lowering of the threshold at which graduates start making repayments, would undoubtedly contribute further to the trends identified above.
“Perhaps a conversation about the kind of society we may wish to help shape is at least as important as the policy headlines the current year will bring?”
Read more: In June 2021, a Hepi report found that reducing the threshold to below £20,000 could save the Treasury £3.8 bn a year.