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The issue of student debt

The issue of student debt

Following on from their shock gains in the 2017 general election, shadow chancellor John McDonnell came out to promise that, should Labour gain power in the next elections, they would promise to abolish tuition fees in the UK and make university education free for all.

Unsurprisingly the announcement landed very well with the party’s youthful voters and members, as well its socially conscious middle class voters, but less so with conservative voters and right wing press outlets.

The often used accusations of spending other people’s money were made, whilst defenders of the scheme argued that education was a fundamental human right and that the costs would be outweighed by the economic benefit of having an educated population who could drive innovation and economic growth.

Whilst there’s little evidence to suggest that a better educated population automatically drives economic growth, from a moral standpoint many agreed with the principle of free education.

The issue of student fees has been one that has rumbled on with national attention for decades, with parties seeking election promising to abolish them for 20 years.

Is there a realistic case for such a policy, though? Would such a move mean an increase in demand in university places, benefitting student landlords? We’ll examine the case here.

Cons

First and foremost in this section would be the astronomical cost to the taxpayer. In its own costings, Labour put the price of such a policy at £11.2bn, which it claimed it would recover through increased and progressive taxation as well as closing loopholes which encourage tax evasion.

That being said, the Institute for Fiscal Studies and many others have calculated the cost much higher, somewhere in the region of £9bn per intake of students, once we factor in the lost income for universities which must be funded by the state as well as the cost of continuing maintenance grants for low income students.

There’s also the issue of a huge misunderstanding of how tuition fees actually work, a case furiously taken up by Martin Lewis of Moneysavingexpert. In his guide to tuition fees he explains “the price tag of university is mostly irrelevant. What matters in practical terms is how much you have to repay – and that’s a completely separate number from the total amount of tuition fees, maintenance loan and interest, because it all depends on what you would pay.

What you repay solely depends on what you earn after university. In effect this is, financially at least, a ‘no win, no fee’ education.”

Much of the language used around student tuition is misleading and unhelpful. The finance you receive is a loan of sorts, but doesn’t go against your credit file and is only repayable if you earn a certain amount of money. That threshold was increased this year by the Prime Minister, meaning that postgraduates don’t have to pay anything unless they’re earning over £25,000 per year.

After 30 years, the debt is written off, meaning that you only pay for your education if you benefit from it in financial terms.

Further to this, though, the argument that abolishing tuition fees would benefit low income students isn’t quite right. Abolishing them now, many argue, would benefit better off students who will not have to repay for their education when they can afford it.

In an article for The Guardian, Jo Johnson, universities minister, wrote “What stops poorer students going to university is not fees, but the cap on student numbers necessary when universities are directly funded through general taxation. By enabling English universities to charge current tuition fees, the government no longer has to ration access to higher education via a cap on student numbers. This enables it to offer more places, including to young people from disadvantaged backgrounds.”

The figures appear to back him up, too, with students from poorer backgrounds actually attending university in record numbers. Access to university in the UK for all students has actually never been better according to official statistics.

Pros

The general conversation around the cost of higher education, whilst possibly directed in the wrong way, is useful to assess other areas of finance such as maintenance grants and other forms of funding for less well-off students.

It’s measurably and objectively true that the cost of being a student, by virtue of an increase in the cost of living, is increasing quicker than it has at almost any other time, meaning disadvantaged students are struggling.

A proper funding scheme to help students with the cost of accommodation, living costs and other expenditure is desirable and could easily be based on income.

Secondly, many argue that tuition fees are a symptom of a wider issue of marketization of higher education and incentivise universities to spend more money on marketing, vanity projects and useless courses with little hope of a good job at the end of it.

Indeed much has been made of the drop-out rates of some courses at smaller universities who are accused of offering courses which do not fulfil their promise to make the graduates a productive member of the labour market or offer them any skills that would be otherwise unique.

In terms of the solution, however, that’s still up for debate. What we do know is that the population value tertiary education more than ever before, with polling suggesting that more children than ever hope to attend university. Obviously this is good news for landlords who can rely on increased demand to drive rents and prices but caution should be exercised if the government fails to recognise the extra support that some students will require to get there.

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