Commenting on the government’s announcement that maintenance grants will not be reintroduced alongside increases to tuition fees and maintenance loans, Carl Cullinane, Director of Research and Policy at the Sutton Trust, said:

“Today’s announcements barely scratch the surface of what’s needed to reform student finance and widen opportunity. While students will welcome any additional money in their pockets, a 3% increase in the maintenance loan will scarcely begin to restore levels which have fallen more than 11% in real terms since 2021. On top of this, raising tuition fees without also reintroducing maintenance grants will hurt students from the poorest households the most. Since the abolition of maintenance grants in England, students from lower income backgrounds have been leaving university with the highest levels of debt. Many are struggling with the rising cost of living, with over a quarter of students skipping meals to save on food costs.

“If the government is serious about breaking down barriers to opportunity, it should be taking steps to ensure students from the poorest backgrounds can meet their basic needs without graduating with excessive debt. Our modelling shows that reintroducing grants can be achieved with little or no additional cost to the public purse, through reform of the repayments system to make it more equitable.”

Notes to editors:

Next year’s increase in the maximum maintenance loan (3.1%), is similar to recent years: 2.5% in 2024 and 2.8% in 2023.

Figures on students skipping meals can be found in the Sutton Trust’s Cost of Living and University Students report.

In March 2024, the Sutton Trust set out a plan for reforming the HE funding system, using modelling from London Economics. It proposes several options for structuring a more progressive system at various cost levels to the Treasury. One of these proposals can be achieved with little or no additional cost to public finances.

Providing £11,400 per year in maintenance support for students from the poorest homes, including £4,121 in non-repayable grants, would halve the gap in debt between the poorest and wealthier graduates. The grant would then reduce for those whose parents earn over £32,525 per year, with loans increasing as a proportion as the overall amount of maintenance available reduces. Maintenance support would taper down to £4,651 at parental earnings over £80,921 a year.

Under this scenario, the poorest students’ debt on graduation would fall from £60,100 to £52,400. For students from the richest families, debt on graduation would only be slightly higher than under the current system (£44,200).

And to keep this scenario cost-neutral a stepped repayment model could be introduced, whereby graduates would only pay 2% on their earnings from £25,000 to £35,000; 4% on earnings between £35,001 and £45,000; 6% on earnings of £45,001 to £55,000; and 8% on earnings above £55,000. In addition, the re-introduction of real interest rates would see increases from 0% for those earning below £25,000, to gradually reach 3% for those earning over £55,000. And instead of the previous 3% interest rate while students are studying, here that rate would only be 1.5%.

These changes to repayment terms would be cost neutral to the Exchequer, with the average cost per student staying approximately the same (£1,600). All graduates would have lower monthly repayments  than under the current system. Although low- and middle-income graduates may not clear their loans under either system, their monthly repayments would be lower, therefore paying less than they currently do overall. High income graduates would make larger lifetime loan repayments, as the combined re-introduction of real interest rates (RPI + interest repayments) and lower repayment rates would keep these graduates in repayment for longer (whereas they pay off their loans relatively quickly under the current system).

For example, those earning £50,000 would pay just £75 a month under these reforms, compared to £188 under the current system.  Graduates earning £75,000 pay £375 per month in the current system, but would pay just £233 per month with these changes. And looking at someone earning £100,000, while they pay £563 per month in the current system, under this proposal their repayments would reduce to £400 per month.

Furthermore, parental income thresholds, used to determine the income levels at which parents are expected to contribute financially to their child’s living costs at university, have not been increased for several years. If these thresholds had increased with inflation since 2016, families on £32,535 or less would be eligible for the maximum loan, compared to the current much lower threshold of £25,000. If parental thresholds had been increased to this higher threshold for 2023/24, work by London Economics for the Sutton Trust estimated an additional 30,000 students starting university would have been eligible for this maximum level of support.

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