Student Loans: Take-Up Rate (Hansard, 7 February 1991)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)
My Lords, by Monday 4th February 1991, more than 89,000 students had applied for a loan to the Student Loans Company Limited.

§ Baroness Hollis of Heigham
My Lords, does the Minister recall that in December 1989 the former Minister for Higher Education, Mr. Robert Jackson, told another place that student loans were necessary because the pre-grant system was so expensive? However, the latest government figures show that the full public cost including grants of each qualifying student is lower in Britain, and not higher as Mr. Jackson implied, than in Australia, Canada, Denmark, Germany, Italy, Japan, the Netherlands and the USA. Does the Minister agree that Mr. Jackson was mistaken and that student loans could and should be replaced by student grants?

§ Baroness Blatch
My Lords, the noble Baroness is entirely wrong. The figures that she has given include institutional funding as well as student maintenance. Regarding student maintenance, the United Kingdom is the most generous to its students and pays £735 per student. That figure is not exceeded by any other country in the world.

§ Lord Gainford
My Lords, can the Minister give any information concerning the repayment of the loans when the student has finished a course at college or university?

§ Baroness Blatch
My Lords, the repayment arrangements for young people mean that no student is required to repay the loan unless they are earning at or above 85 per cent. of the national average wage. That at present is about £11,530.

§ Lord Peston
My Lords, can the Minister confirm that the interest rate on the repayment of the first year's loan will be 9.8 per cent. per annum? Therefore, with inflation considerably below that, the Government will have failed to meet the key criterion of the loan scheme; namely, that students will repay at zero real interest rates. Will the Minister confirm that concerning the first year's loan they will be paying positive real interest rates of a considerable magnitude?

§ Baroness Blatch
My Lords, the noble Lord has raised this issue previously. What is happening is 1270 entirely consistent with the primary legislation. It is important that when students take up the loan they know the interest rate at which they will be repaying it. Therefore, a particular time of the year is chosen to fix the rate, and this year it happens to be the beginning of the year. It is hoped that with the fall in inflation, next time the rate is fixed it will be much lower.

§ Lord Peston
My Lords, the Minister knows that I do not believe that the Government's action is consistent with primary legislation. However, can she confirm that this year's students will be repaying at a positive real rate of interest?

§ Baroness Blatch
My Lords, if a loan were taken out in September, the rate of interest would have been fixed until the next time at 9.8 per cent. Only if the rate falls below that will there be a discrepancy in what is paid. The rate is fixed on an annual basis and therefore when it is fixed next time it may be lower.

§ Lord Tordoff
My Lords, is it not the case that students will not be in a positive position until inflation begins to rise? I understand that the Government do not intend that to happen.

§ Baroness Blatch
My Lords, the students will take out the loans on an annual basis. The gap about which we are talking exists between the date on which the loan is taken out and the date on which the inflation rate applies. There will be times when students will gain, and times when students will lose.

§ Lord Tordoff
My Lords, with respect, is it right that the only time when students gain will be when inflation is rising?

§ Baroness Ewart-Biggs
My Lords, is the Minister aware that at present many students who are in receipt of a full grant have parents who do not supplement their income and therefore they take on a variety of jobs in order to cover their expenses? Does the Minister agree that the country as a whole would be served better if students spent more time on their studies, but that student loans will not help that situation?

§ Baroness Blatch
My Lords, the student loans system will help many young people who do not receive any grant from the state but who are supported entirely by their parents. Sadly, some parents do not support their children as well as they ought. However, whether students work during the holidays is a matter for them: we live in a free country.

§ Baroness Blackstone
My Lords, given the fact that the take up of the student loans scheme has been disappointingly low in terms of the Government's expectation, have they given further consideration to extending the scheme to part-time students who do not qualify for maintenance grants but who face considerable costs in pursuing their studies?

Baronesss Blatch
My Lords, there are no plans to extend the scheme at present. The take up may be disappointingly low this year because the loan and the grant together constitute an increase of 25 per cent. in the grant that they received last year.

§ Lord Kennet
My Lords, do the Government know how long it takes between a student applying for a loan and receiving it? Is the Minister aware that in some universities students who applied in October have as yet received nothing?

§ Baroness Blatch
My Lords, we know that by and large the Student Loans Company Limited is responding to applications within the target of 21 days. The reason for not meeting the target may be because forms have been incorrectly completed or processed by the student, the university or both.

§ Lord Henderson of Brompton
My Lords, does the Minister have any information about the take-up rate of loans for disabled students? How are the special arrangements for student loans for the disabled working?

§ Baroness Blatch
My Lords, the noble Lord has raised an important issue, but it is too early to make such a judgment. When the provisions were put on the statute book, we promised to review the way in which the scheme was working. I am certain that that point will be taken into account.

§ Baroness Hollis of Heigham
My Lords, given that often our students are desperately poor, having lost grant, housing benefit and income support; given that the new loans system is expensive, unpopular, has a low take-up rate and is an administrative shambles; given that the loans, where they replace grants, narrow access to higher education (we have fewer students in higher education than almost any other country in Western Europe), does the Minister agree that it is time to scrap the loan system and invest properly in our higher education, in our students and in our future?

§ Baroness Blatch
My Lords, I profoundly disagree with the premise on which the noble Baroness has based her question. All her assumptions are wrong. By reducing the weight of paying each student £735, and by freeing that money, more funds will be made available to help the expansion of the higher education system.