Jubilee 2022: Writing off the student debt
The unjust student debt can be written off – if we choose to have a fairer society. Don’t let anyone convince you this is not so.
In summer 2012, English university fees suddenly tripled to become the highest in the world. Children choosing to go to university had no choice in the matter – to the vast majority it was huge debt or no degree.
These fees turn education into a cheap and nasty marketplace where universities that lie about their product can succeed. The supposed benefits of markets simply do not apply to higher education: students and their parents are not repeat consumers. They don’t know what they are buying, while universities know very well how to tart up what they’re selling. Some have become more focused on marketing, thanks to the financial incentive, than on providing a good education.
Labour under Jeremy Corbyn has said it will end tuition fees from the moment it is elected, and return our universities to institutions acting for the public good, not profit-maximisers. However, the Labour party as yet has no policy on what to do about outstanding student debt – how to soften the injustice for students who have already racked up debt at the point when fees cease. University officials estimated the policy of ending tuition fees and bringing back some maintenance grants would cost £10bn a year. But then there is the historic debt.
So far Labour has been struggling to find a way forward. The party cannot go into an election telling young people that if they are unlucky enough to have started university the day before a Labour government is elected, they will still have to pay off a £30,000+ loan to cover their fees. It would not be fair on students, and would create a cliff edge for English universities, offering an incentive for students to defer entry until after a general election, leading to a sudden fall in fee income, empty lecture theatres and probably redundancies across England’s universities.
The solution, though, could be fairly simple: Labour could introduce a cap on maximum future student loan repayments for first-time undergraduate degrees, with the rest of the debts written off.
The principles would be as follows. First, no student who started their course in 2012 should repay more than a student who started the same course in 2011 (when fees were a little over £3000 a year). With interest added that puts the debt cap for a student who started in 2012 at £12,000 (instead of anything from £30,000 upwards).
Secondly, no student who starts their course in the year immediately before the new government is elected should pay more than one who starts the same course a year after. In other words, they should pay tuition fees with a loan, but for them that loan would to be written off entirely if Labour won.
Thirdly, in between 2012 and the year of a Labour election win, the maximum repayable loan should reduce fairly, as shown in the table below. If Labour wins in 2022, then those who entered university in 2017 (midway between 2012 and 2022) should only have to pay back half of the maximum that any student who entered in 2011 would have to pay.
The plan could be called “Jubilee 2022” – in recognition of the final year in which the cap would be implemented, exactly 10 years after exorbitant fees were introduced. If Labour is elected before 2022, the cap could simply begin to operate sooner.
So, how much will you pay?
The “Jubilee 2022” cap on tuition fee debt
Date of start /Fees repayable for a three-year course
2012 £12,000 (the equivalent of £4,000 tuition fees a year)
2017 £6000 (the equivalent of £2,000 tuition fees a year)
2022 zero to pay (the equivalent of £0 tuition fees a year)
Debts above this would be written off. For those whose parents paid their fees upfront there will be no refund.
How will we pay for this? The answer is another question: if the rest of Europe can do it, why can’t we? Across mainland Europe, including all the best universities, tuition fees are either much lower or non-existent. We could raise taxes on wealth, on corporations and on people receiving the highest incomes to levels already seen in the rest of western Europe. There is nothing unusual about it. Because higher education is an investment in the productivity of the economy, we should fund it through state, not individual, borrowing.
This plan would not cost as much as some might imagine because – as has become increasingly clear – many, if not the majority of graduates in future will be unable to pay back their loans. Some, such as medical students with huge debts to repay, even have an incentive to leave the UK and never return.
At the moment government is actually paying most of the fees, but pretends it is not through an opaque relationship with the Student Loans Company and the fiction that future graduates will be as well paid as those in the past, when being a graduate was far less common. Implementing this idea moves the funding model away from the fantasy of putting things off-balance-sheet.
The key is that we transform a set of onerous private debts into a social obligation borne by the government – by us all collectively. This is both a progressive way to fund higher education and a recognition of its status as a public good.
Published 30th October 2018 by the Guardian, based on a report by Danny Dorling and Michael Davies for the Progressive Economy Forum, also published on October 30th 2018.
To read the full report this article is based on, and for and a link to that report on the Progressive Economy Forum Website click here.