MIDDLE-CLASS students should pay proper interest rates on loans to end the “socially regressive” support system, according to the outgoing head of the funding council for universities.
Sir Howard Newby, former head of the Higher Education Funding Council for England (Hefce), condemned the current package of loans, top-up fees and grants as an unsustainable public subsidy of the wealthy which should be scrapped. He also said that the Government had invested too little money to attract the worst-off to university and there was only enough cash to fund a few top research universities.
Speaking for the first time since taking up his new post as Vice-Chancellor of the University of the West of England this week, Sir Howard told the Times Higher Education Supplement: “Student support arrangements are socially regressive because middle-class kids can pick up a subsidy on the zero interest rates applied to student loans. The costs of these arrangements are applying a major constraint on the expansion of universities.”
He insisted that if middle-class students paid a real rate of interest on student loans, it would save up to £600 million a year on public subsidies.
His comments come ahead of £3,000 a year deferred top-up fees, due to be introduced in September. While 400,000 students are expected to claim non-repayable grants and bursaries worth up to £300 million, the Government already estimates that most will service a minimum debt of £15,000 until their mid-thirties.
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At the same time, all students can claim loans from the Student Loan Company of up to £6,170. All undergraduates may apply for 75 per cent of the maximum, while the remaining 25 per cent will depend on family income. Financiers advise students, even if they do not need it, to apply for the loan as it is pegged to inflation and is a cheap form of borrowing.
Sir Howard also said that university fees could rise to £5,000 a year from 2010. But he suggested that to stop any future wastage in the system, there should be a single funding body that would replace the Student Loans Company and distribute research funding, as well as the block teaching grant for tuition fees, and bursaries to universities. He added: “Under current levels of investment there are only five or six world class research universities (in Britain).”
Although the Government has set a target of 50 per cent of 18-30 year olds to be in higher education by 2010, the Hefce, under Howard Newby, agreed to fund only 5,300 extra full-time undergraduate places for 2005-06. It has threatened to cut funding if any university exceeds its quota.
Bill Rammell, the Higher Education Minister, rejected Sir Howard’s criticisms and said that future funding arrangements should see more poor students in university.
“The Government has demonstrated its commitment to widening participation,” he said. “We have ended up-front fees and reintroduced grants for students from poorer backgrounds, while universities are offering generous bursaries to students from low-income households. From September, students don’t need to pay a penny back until they earn more than £15,000.”