Rich kids will pay less student debt than middle classes

Rich people will end up paying back less than the middle classes for tuition fees because they will clear their debts quicker and avoid bigger interest payments.

Sally Hunt is the General Secretary of the University and College Union (UCU)

A report (pdf) by Grant Thornton has revealed rich people will end up paying back less than the middle classes for tuition fees because they will clear their debts quicker and avoid bigger interest payments. Yet, one of the coalition’s main defences for introducing the new tuition fee regime was that it was fairer and the highest-earning graduates would pay back the most.

As the Commons moved towards the vote on raising tuition fees, ministers were telling the nation fees above £6,000 a year would be the exception rather than the rule and insisting high earners would be hit hardest with the new fee repayment plan.

This report shows what UCU has argued all along, which is that while the big earners clear their debts the fastest and avoid the new punitive rates of interest on student debt, middle earners will face years of repayments.

Social workers and teachers will be the ones paying back the most, and continuing to pay it back, long after the investment banker’s account has been settled.

The Grant Thornton report also suggests the key issues that put universities’ finances at risk stem from government policy. It cites the introduction of fees (and a marketplace in higher education), changes to student visa regulations and the dramatic drop in government funding as universities’ main challenges.

Worryingly, a report in March that examined the financial sustainability of universities in England found that, in 2009/2010, five per cent of universities were considered to be at high financial risk and more than a quarter were performing below at least one financial benchmark.

While there might be a handful of winners under the new system, many institutions will struggle to cope financially with the new untested regime, which suggests that the sector should have been a little more forceful in its dealings with government around key policy areas.

We understand universities’ reluctance to overemphasise any financial difficulties, but, when nine out of ten university chiefs are saying privately that a university will go bust, then perhaps a more honest appraisal of the damage government policy may do is required. There never seems to be a shortage of headteachers prepared to be interviewed in dilapidated classrooms when schools’ budgets are at risk.

If the government really is happy for some universities to go to the wall then it should be upfront about it. Universities provide a much-needed boost to local economies and it would be a brave minister who would explain to local people why their university was deemed surplus to requirements.

27 Responses to “Rich kids will pay less student debt than middle classes”

  1. Jonathan Davies

    @ucu gen sec, Sally Hunt, analyses Grant Thornton’s financial health of higher education report for @leftfootfwd http://t.co/Qtz3EG92

  2. Warwick UCU

    @ucu gen sec, Sally Hunt, analyses Grant Thornton’s financial health of higher education report for @leftfootfwd http://t.co/Qtz3EG92

  3. Alex Braithwaite

    RT @leftfootfwd: Rich kids will pay less http://t.co/4DvTq6Q7

  4. Gill Goodswen

    Rich kids will pay less student debt than middle classes: http://t.co/yCRU6l2W writes @UCU’s Sally Hunt

  5. Michael

    Rich kids will pay less student debt than middle classes l Left Foot Forward – http://j.mp/owknxw

  6. Beverley Clack

    “@TheRightArticle: Rich kids will pay less student debt than middle classes l Left Foot Forward – http://t.co/GdNGvFjK” > Surprise, surprise

  7. Max

    Rich kids will pay less student debt than middle classes l Left Foot Forward – http://j.mp/owknxw

  8. TheCreativeCrip

    Rich kids will pay less student debt than middle classes l Left Foot Forward – http://j.mp/owknxw

  9. Jezz White

    RT @leftfootfwd: Rich kids will pay less student debt than middle classes http://t.co/Hl1ZZ3R7

  10. Emily Needham

    RT @leftfootfwd: Rich kids pay less student debt http://t.co/hjPQkQXx "Social workers and teachers will be the ones paying back the most…"

  11. yyxhjdsn

    couldn’t be bothered to read the whole article, just wanted to say, 2 people who pay back money at different rates, pay back the same overall, if interest is paid at market rate. a pound paid back now is worth more than a pound paid back in the future. that’s what the interest rate is. the poor student pays more in nominal pounds over longer but the total of those nominal pounds is worth the same as the rich student that pays it back quickly

  12. Laura

    The figures Grant Thornton use bear no relationship to the salaries of most graduates of my acquaintance. Their ‘middle earner’ is on £45k at 27 and £70k at 34. Is this really the median graduate public sector salary? They even say that he is in the fast stream! Their ‘low earner’ is a journalist who starts on £28k and has a 3.5% pay rise *every year*. Can we have some calculations for the real low-paid graduates, who spend their 20s never hitting £30k, take a career break to raise children, and, realistically, hit a 5-year pay freeze at some point in their careers?

    What planet is the person on who thinks £70k is a ‘middle income’?

  13. London IWW

    Rich kids will pay less student debt than middle classes http://t.co/yanbnVoZ | #NoFees #NoCuts #Universities

  14. Duncan Stott

    1. What Laura said. The ‘middle’ discussed here is not the middle in reality. I recall Left Foot Forward has been critical of misdefining middle incomes in the past, but have now fallen foul of their own criticism.

    2. No mention of lower earners here. They will pay back significantly less than those above them, as debt is automatically cancelled after 30 years. Repayments are 9% of salary above £21000, so that will mean the majority of graduates having debt cancelled… that means a proportion of their university tuition end up being free.

    3. The way to get the richest to pay back more is to *increase* tuition fees. The higher fees are, the more the rich will have to pay back. This doesn’t hit low to middle earners as all their outstanding debt gets cancelled. The higher fees are, the more progressive the whole system becomes.

  15. Anti-foreign student rhetoric risks real harm to our global reputation | Left Foot Forward

    […] this week a report (pdf) by chartered accountants, Grant Thornton, warned that the three biggest challenges UK […]

  16. Leon Wolfson

    @3 Free? Is that what paying far more than the original debt and then having the rest of the debt kindly waived is called?

    Students: Unless you’re going to Oxbridge, if you pay theses fees you’re an idiot. Take this from a University tutor. Go abroad, it’s cheaper in many countries and you’ll learn about another country as well.

  17. Tim Klotz Davenport

    Rich kids will pay less student debt than middle classes: http://t.co/yCRU6l2W writes @UCU’s Sally Hunt

  18. Are devolved nations playing supermarket sweep with fees? | Left Foot Forward

    […] also: • Rich kids will pay less student debt than middle classes – Sally Hunt, September 20th […]

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