Postgraduate Diary: Interest Free Loans!

It is a phrase which no doubt appears in your inbox several times a day, and gets dragged to the junk folder. However, in trying to push through the financial reforms in higher education - under which students would take out loans to pay for their university tuition and living costs, rather than getting grants - the government likewise advertised that these loans would be "interest free." Just as you should never click on a spam email, you should always suspect something is not quite right when a government promises you something-for-nothing. Read the small print in this case, and you will find that the "interest free" loans are tied to the base-rate of inflation, increasing annually by the same amount. But who of us desperate to go to university ever bothered to read the small print? I didn't, and clearly neither has Donald Macleod, who writes on the Education Guardian Blog that:

When tuition fees of £3,000 squeaked through the Commons by five votes keeping student loans to zero real interest rates was obviously a price ministers had to pay.

Students in fact got an outrageously good deal - no fees upfront, interest free loans to cover the cost of tuition and repayment when they were earning as graduates.

Macleod concludes that:

Spending £1bn a year to subsidise graduates who as a rule earn more than the national average seems a waste when there is so much that deserves funding in universities - and even more so in schools.

As one respondent complained of Macleod "You make me sick - tory w@nker!" I agreed with his tone, if not with his vocabulary, so (for all that they will not be read) I added some words of my own, nothing that from my own experience, with inflation running at around 2.5% a year, I graduated owing £10,000 and now five years later I owe around £12,000. Having chosen to do a PhD, and hence defer entry into the job market, you could say that I brought this extra £2000 of debt upon myself.

However, I have friends who went into jobs from graduation, are now on average salaries, and their repayments only just cover the cost of the "interest" on the supposedly interest-free loan; they have yet to pay back a penny of what they originally received from the government. Of course, I also have friends who have yet to find graduate jobs (in spite of having not one but two degrees, the increasingly-necessary postgraduate degree being paid for by further debt through the Career Development Loans scheme), and I also have friends whose salaries (often in the public or voluntary sector) do not track inflation, unlike their loans.

Even so you could argue that many students will ultimately end up in better paid jobs, perhaps working as corporate bankers in London. I agree that students, and not just the average taxpayers of Blair's generation, should put something back into the system. Unfortunately, the way the loans/tution fees scheme was instigated has been unfair on students, unfair on taxpayers who are still owed money by graduates, and unfair in relation to foreign students who can take from the loans pot without being compelled to put back into it.

Nevertheless, I pleaded to Macleod, please don't imply students got the good deal, as if they are scrounging on the society that put them through university. It is this generation of students who, besides, possibly, earning salaries higher than the national average, will be developing the technologies to combat the climate change for which our parent's generation are entirely responsible, and the medicines which will allow them to live longer (and enjoy a longer retirement). They may even do something about spam.

Labels: Postgraduate Diary, student loans