HC Deb 25 June 1991 vol 193 cc847-9
5. Mr. Canavan

To ask the Secretary of State for Education and Science how many representations he has received this year about the student loan scheme.

The Parliamentary Under-Secretary of State for Education and Science (Mr. Alan Howarth)

I have received very few letters about loans this year. The scheme has been successfully set up and is running smoothly. More than 180,000 students have so far applied for loans.

Mr. Canavan

Is the Minister aware that many students find it difficult to continue their studies due to poverty resulting from the introduction of the student loan scheme and the first ever freezing of student grants from this autumn, together with the Government's decision to stop students receiving housing benefit and their disqualification from receiving income support and hardship allowance during the summer vacation? Bearing in mind that the unit administration costs of the loan scheme are more than double the Government's original estimate, is it not about time the Government realised the error of their ways, scrapped the disastrous loan scheme and replaced it with a far fairer system of student grants?

Mr. Howarth

The hon. Gentleman overlooks the fact that the combined uprated grant and the new loan will increase student support by 25 per cent. this year. If students were facing the kind of hardship that the hon. Gentleman suggests, it would be very odd if student numbers continued to expand as quickly as they are expanding now. Applications through the Universities Central Council on Admissions and the Polytechnics central admissions system are up 8 per cent. this year. The loan to which each student is entitled, which this year is £420 outside London, is appreciably more than the average benefit claimed, which we estimate at £327. With regard to the costs of running the system, it is absurd to suggest that the initial establishment costs, which are an investment for the whole life of the scheme, should be a measure of the costs per account of each individual student loan. Obviously, as the number of students taking out loans steadily increases, as is happening now, the unit cost per account will steadily decline.

Mr. Pawsey

Can my hon. Friend confirm that in 1979 one in eight of our young people were in advanced education while today's figure is one in five? Can he also confirm that more than 1 million of our young people are in advanced education and that enrolments increased last year by 10 per cent? Does he agree that those figures vindicate the Government's position with respect to advanced education?

Mr. Howarth

My hon. Friend is right. He draws attention to an expansion of personal opportunity and a change in our society of the first order of importance, comparable in importance with the expansion of home ownership over which the Government are presiding.

Mr. Andrew Smith

Will the Minister confirm that among the representations that he has received were representations from the Committee of Vice-Chancellors and Principals drawing his attention to the fact that, on the basis of an extensive survey, the unit cost to institutions of issuing the certificates under the student loans scheme is running at £7 per certificate, compared with the £3.50 that the institutions are reimbursed by the Student Loans Company? Will the Minister instruct the company to reimburse the institutions fairly for the administration costs, especially as the banks were to be paid a £12.50 handling charge before they pulled out of the scheme? Or is higher education to be short changed yet again, as it has been so disgracefully by the Government's refusal to compensate institutions for the increase in value added tax?

Mr. Howarth

The hon. Gentleman is perfectly right. Representations have been made to us that the reimbursement of administrative costs provided by the Student Loans Company might be increased. We are, of course, considering those representations. There has been a wide diversity of administrative practice across the range of higher education institutions and a wide diversity of costs. We shall look to reimburse institutions on the basis of the most efficient practice.

Mr. Amos

Does my hon. Friend agree that as the student loans scheme has enabled more students to enter higher education this year, and as students do not have to repay the loan until the year after they have graduated and at a zero real rate of interest, that is a very good deal for students and can in no way be construed as depriving them of the opportunity to enter higher education?

Mr. Howarth

My hon. Friend very fairly points out that the student loans scheme is a humane and practical scheme which offers students additional support well above the previous level of support and at a zero real rate of interest. Students only have to repay in real terms the money that they borrowed in the first place. That contrasts interestingly with the terms offered by the banks. It has been rather gratifying that the banks have responded to the stimulus of the competition provided by the Student Loans Company by offering relatively advantageous borrowing terms to students while they are studying. However, the repayment terms compare very unfavourably with the repayment terms under our scheme.