Graduates will owe up to £53K
Changes to student finance announced in the Budget will mean more than half a million students from poorer backgrounds will graduate owing up to £53,000 after maintenance grants are replaced by loans.
From 2016 maintenance grants, which cost to the taxpayer of about £1.57bn a year, will be replaced with loans, which they will be expected to repay in addition to loans for their tuition fees.
They will graduate owing up to £53,000 in total, compared with £40,500 before maintenance grants were scrapped.
However, middle income students are forecast to be hit the hardest, costing them an extra £6,000 over the repayment of their loan. Those on median graduate earnings – earning around £23,000 in their early 20s, rising to £34,000 in their early 50s – will end up repaying over £6,000 more in total over their lifetimes.
Students from households with pre-tax incomes of up to £25,000 (those currently eligible for a full maintenance grant) will have a little more cash in pocket whilst at university. But they will also graduate with around £12,500 more debt, on average, from a three-year course.
This means that students from the poorest backgrounds are now likely to leave university owing substantially more to the government than their better-off peers.
Jack Britton, research economist at the IFS, said: "While the small increase in support for living costs available to students from lower-income families will undoubtedly be welcomed by many, the switch from maintenance grants to maintenance loans will result in substantially higher debt for the poorest students.
"For most, though, it is the freezing of the repayment threshold which will do more to raise loan repayments, and hence increase the cost of higher education.
"The 2012 reforms appear not to have had a negative effect on higher education participation amongst full-time students from poorer backgrounds. This likely reflected the fact that the system was designed to protect both that group and those with low expected lifetime earnings.
"Only time will tell whether these new changes will be similarly benign in their effect."
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