A History of Student Loans
Student loans are very different from the likes of payday loans and guarantor loans. They are designed to cover the university tuition fees as well as provide financial aid to allow a student to pay their rent and live to a certain standard. Therefore, there are two parts to a student loan – the tuition fee loan and the maintenance loan. A student will never see the part of the loan which covers the tuition fee as this will go directly from Student Finance to the University in which the student is studying at. The maintenance side of the loan will be transferred into the students current account for them to spend however they wish. In Scotland, there are no University fees at all if you are a resident of Scotland and attend a Scottish university. However, Scottish students are still entitled to a maintenance loan.
There is much controversy surrounding the price of student loans, especially after the conservative and liber democrat coalition government increased university fees in 2010 from £3,000 per year to £9,000 per year. This happened despite the liberal democrats promising to scrap the fees altogether, should they win a majority in the election. Alas, the conservative government won the election but without a majority and therefore had to form a collation, choosing the liberal democrats and their promise was to go out the window upon accepting this offer.
Now, fees at certain universities are increasing further to £9,500 which has caused some upset amongst those who are wishing to become students and those who believe that this is far too much to charge and will ultimately result in the discrimination of those who are from poorer backgrounds.
However, University has not always been something which has been such a financial commitment proving far more affordable in the past. Here, we are looking at a brief history of student loans from the 1960s to today.
In the years following World War II, most local education authorities were responsible for paying for student’s tuition fees as well as providing them with money to cover their living costs. In 1962, mandatory maintenance grants were introduced to help students to cover the general tuition fees as well as the cost of living. Grants were different to loans as they did not have to be paid back. The Education Act of 1962 made it a legal obligation for all of the local educational authorities to comply to this.
In the year 1980, we saw an increase in student grants from £380 to £1,430 which is quite a large jump. These were still grants and not a loan, therefore there was no obligation to pay them back at this point.
Four years later in 1984, the Conservative Education Secretary Keith Joseph opted to abandon his plans for parents to be made to make contributions towards the fees. This would have ultimately alienated the working class, meaning that many deserving and capable UK citizens would miss out on the option of higher education. Therefore, it is easy to see why this plan was withdrawn, especially after the amount of criticism it faced.
Fast-forward to 1989, the Tory Government freeze grants and introduce student loans. However, grants were not scrapped altogether and grants of up to £2,265 were available for students who came from poorer backgrounds. Meanwhile, loans of up to £420 were on offer to all applicants no matter their financial background.
In 1996, the Conservative prime minister, John Major, commissioned Lord Dearing to make recommendations on what he believed would benefit higher education in terms of funding. Dearing writes his report which suggests that students should be contributing towards their own university education funding. He states that students should be paying approximately 25% of the cost of their tuition themselves, but the government grants should stay in place.
A year later in 1997, Labour is elected with Tony Blair as the Prime Minister. In their manifesto, Labour outlines their commitment to ensuring that “the costs of student maintenance should be repaid by graduates on an income-related basis”.
David Blunkett, the Education Sectary for Labour at the time, announces the introduction of £1,000 tuition fees which are to be paid by each and every student in each year of study as of the September of 1998. This was known as the Teaching and Higher Education Act. The student grant of £1,710 is abolished and replaced by means-tested loans for everyone except for the poorer students. The total loans provided increased from £941 million in the 1997 to 1998 academic year, to £1.23 billion in the next year, when the tuition fees took effect.
Come the year 1999 and a committee which was led by Lord Cubie began a comprehensive review of higher education funding in Scotland. The report written up by Cubie recommended in December that tuition fees in Scotland should completely be scrapped and it should be the Scottish executive that should fund higher education in its entirety.
In 2001, Labour was re-elected with a manifesto which pledges to avoid introducing top-up fees and there will be legislation against this. By 2002, more than 80 Labour backbenchers were calling for tuition fees to be scrapped.
Only two years after promising not to introduce top-up fees, Labour publishes a paper which sets out proposals to allow universities to set their own fees to a cap of £3,000 per year. The fees were to be repaid once a student had reached a salary of £15,000. There was a backlash against this.
By 2005, almost every university had set their fee at £3,000 per year. In 2006, students starting that September were the first to be charged the higher £3,000 fees. Universities had stated that they still needed £1.3bn in extra funding. The Conservative leader, David Cameron, says tuition fees are unavoidable. “The money’s got to come from somewhere.”
Fast-forward to 2010 and the Conservative/Liberal coalition. Lord Browne sets out a recommendation that students should pay at least £21,000 for a three-year university degree. This meant that the fees went up to £9,000 a year minimum. This has been considered one of the most radical moves made in terms of education in decades and is often used against both the Conservative government and Liberal Democrat party.