DEBATE: With student debt now blowing a hole in the government’s budget, should tuition fees be cut?

With student debt now blowing a hole in the government’s budget, should tuition fees be cut?

Iain Mansfield, a former senior civil servant, says YES.

This week’s decision to reclassify student loans has exposed the myth that tuition fees were the only way of making mass higher education affordable – they were never affordable, just off the balance sheet. It’s now time to move to a more effective model.

Fees of £9,250 see students graduating with over £50,000 of debt, which 80 per cent will never fully repay, and encourage universities to proliferate unneeded, low-cost courses.

The repayments impose a 40 per cent marginal tax rate on median earners for 30 years, depressing consumer spending power and contributing to the decline in home ownership.

A system of £3,000 fees, topped up by teaching grant to the actual cost of the course, and repayments taken from income above £18,000 would remove market distortions.

Combined with a merit-based system such as a DDD grade threshold for loan eligibility – not an arbitrary numbers cap – this would be fairer, more sustainable, and more likely to deliver the graduate outcomes the UK needs.

Ryan Shorthouse, founder and chief executive of Bright Blue, says NO.

This might appear good policy – for poorer students, facing lower prices, and for the government, dishing out less in loans. But it will help neither.

Students do not need to pay anything from their own pockets – they get a loan from the government. It’s graduates who (re)pay – nine per cent of their salary above £25,000 for 30 years.

Roughly 80 per cent of graduates will not repay their loans in full, meaning the government writes off outstanding debt for lower and middle earners, estimated to cost 25p for every £1 lent. The Office for National Statistics recently declared that this subsidy now counts towards today’s deficit, whereas the repaid part of loans remains off the books.

If fees were cut, the government would have to raise direct grants to universities to compensate, adding much more to today’s deficit than loans do. And since most graduates do not fully repay anyway, a fee cut will likely only reduce what the wealthiest pay, benefiting the highest earners.

Unexpectedly, cutting fees would end up being expensive and regressive.