The study of the determinants of student loan take-up is especially salient for English universities and students
Higher education reforms since 1998 have made the financial sustainability of the sector heavily reliant on tuition fees, underwritten by student loans. In , close to 40% of English higher education institutions’ total income of ?29.9 billion came from home and EU students’ tuition fees (Higher Education Funding Council for England 2018). As tuition fees in England have increased over time, so has the size of student loans and student loan debt. As a result, English domiciled students who study in universities graduate with the highest average debt in the Anglophone world (Kirby 2016). Consequently, it takes English students far longer to repay their loans after graduation compared with their peers in other countries. In 2014, the average time to repayment was estimated to be 27 years in England compared with 8.4 years in Australia (Hillman 2014) and 19.7 years in the USA (One Wisconsin Institute 2013). 2017b).
Student loans in England: the context
We begin by outlining the policy context and history of student loans for undergraduate full-time domestic students Footnote 1 in England up to , focusing on the loans available to Next Steps respondents who entered higher education in 2009 and 2010. Footnote 2
The notion of cost sharing has largely informed England’s higher education funding policies since the 1990s, whereby more of the costs of higher education shift from government and taxpayers to students and their families. Prior to 1998, public universities were fully funded by the state and English domiciled full-time undergraduates paid no tuition fees. Low-income students were eligible for maintenance grants towards their living costs and in 1990 mortgage-style maintenance loans were introduced for all undergraduates.
Encouraged by government policy and rising demand, between the early 1980s and late 1990s, higher education more than doubled in size to over 1.6 million students. But government funding failed to keep up while per student funding declined by 39%, leading to a financial crisis (Murphy et al. 2018). In response, the government set up an independent review of funding in 1996 which set out the rational for tuition fees repaid by loans. However, the new incoming government rejected the review’s proposals, and in 1998 introduced two cost-sharing policies: means-tested tuition fees of ?1000 paid up-front for all undergraduate courses, and enhanced, fully income-contingent, maintenance loans to replace maintenance grants for low-income students. Footnote 3 As a result, the average value of maintenance loans increased steeply up to 2003 and has continued to rise subsequently (Fig. 1). The average value of maintenance loans in was ?3600. Take-up rates increased in parallel from 28% in 1990 to 84% in .
Following the most recent student loan reforms, which included extending the repayment time from 25 to 30 years, it is now predicted that 83% of students in England will not repay their loans in full within 30 years, when all outstanding debt is forgiven (Belfield et al
After years of under-investment in higher education, the ?1000 means-tested fees proved inadequate for universities to fulfil the government’s desires to harness knowledge for wealth creation, meet the high-level skills required to compete in a globalised knowledge economy, and expand and widen higher education participation. Controversially, in 2006, the government introduced tuition fees of up to ?3000 per year payable by all undergraduate students, supported by income-contingent tuition fee loans. These loans increased universities’ income and facilitated the tuition fee hike by making it more politically and socially acceptable. That year, 397,000 full-time students took out a new tuition fee loan worth an average of ?2030. Since 2006, the number of students taking out tuition fee loans has risen continuously, as has the average value. By , 887,000 full-time students had taken out tuition fee loans-a take-up rate of 84%, borrowing an average of ?3210. Debt at graduation from full-time study reached an average of ?16,160 in 2011 up from ?2690 in 2000-reflecting the 2006 funding reforms (Student Loans Company 2018).