Claims that the tuition fee system is progressive aren't supported by the evidence, this report finds.
University graduates are facing a mid-life tax crisis because of student debt, a new report has found.
Amid political debates about tuition fees and graduate debt, a report has found teachers, social workers and nurses, who are less likely to fall into the top tax rate, will face longer repayment plans. This means they pay back a higher proportion of their wages over their working lives.
The London Economics report, commissioned by the UCU, says “there are no winners under current student funding system, just different ways to lose”. They wars that a lack of disposable income will make saving for mortgage or pensions impossible.
UCU argued the extent of the loan repayment burden wasn’t well understood either by students, policy makers or politicians.
Co-author Dr Gavan Conlon said that while people claimed the loan system was progressive, evidence shows relatively less-well off graduates in “key roles…contribute a higher proportion of their earnings to student loan repayment than many more highly paid graduates”.
The report called for an “in-depth review of the current system…as soon as possible”. The union also called on universities minister Jo Johnson to pledge to tackle this impending tax crisis.
Later today Johnson will give a speech in which it’s thought he’ll call for greater value for money for students. He’s will tell vice-chancellors they should to explain their six-figure salaries to students.
The study looked at how men and women in different occupations are affected by loan repayments. They found a male school teacher will pay a total of £121,000 over his working life and a male nurse £133,000 – more than an IT professional (£106,000), lawyer (£85,000) or finance professional (£86,000).
Women high earners do particularly badly in terms of length of time on the high tax rates. A female medical professional will spend 22 years (from 29 to 50) on the 51% rate, compared to a male colleague on it for just 17 years. That translates to a woman paying back a total £192,000 in loan debt over the course of her career, compared to the £142,000 paid back by a male colleague
UCU general secretary Sally Hunt attacked the current system:
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As some better-paid graduates reach their 30s and 40s they will be hit with marginal tax rates of 51%. Meanwhile men on lower salaries working in our public services like teachers, nurses and social workers will never pay their debt off fully and will end up paying more money back in total.
‘That money should be going into saving for retirement, towards a mortgage or even starting a family. This generation of graduates sees debt wrack up from their first day of university and some will never pay it off.
‘No wonder they are so angry with the politicians who created such a deeply unfair system at the same time as reducing corporation tax for the most profitable businesses – who themselves benefit most from the supply of graduates.’