Student Debt and Retention Rates (Hansard, 22 May 2003)

§ Margaret Hodge

Our White Paper "The future of higher education" proposes a number of measures which address concerns about student debt, particularly for students from low income families. In particular, from 2004/05 around 30 per cent. of students will benefit in full from the new HE Grant of £1,000 per year and a further number will receive a proportion of £1,000. The grant will be additional to the loan but students can choose to reduce their loan take up, including costly commercial loans, and hence their future debt.

From 2006/07 the abolition of the requirement to pay upfront fees and new university bursary schemes to support lower income students will also help reduce the need to borrow. The Government will continue to means test the first £1,100 contribution to fees; at present only 40 per cent. of students pay the full contribution. In 2001/02, 43 per cent. of students received a full grant to cover tuition costs and 16 per cent. received a partial grant, institutions that wish to charge higher, variable fees will be required to enter into an access agreement with the Office for Fair Access (OFFA). The access agreement will cover proposals to extend the bursaries and other financial arrangements they will offer, such as subsidised accommodation, travel, books, study aids etc.

Student loans will continue to be offered at highly subsidised rates. Unlike commercial debt or mortgage there is no interest charged other than inflation. From 2005 the threshold at which students start to pay back will be raised from £10,000 to £15,000, helping new graduates and lower earners. This makes debt repayments lower and more affordable and repayments will continue to be income contingent. The new Student 1008W Income and Expenditure Survey for 2002/03, currently being undertaken, will give authoritative information about students' cost of living and anticipated debt.

We have asked the Higher Education Funding Council for England (HEFCE) to bear down on non-completion. To that end, HEFCE are funding Action on Access to highlight and disseminate good practice in student retention. Further measures planned by HEFCE to improve retention and increase information to potential students include: 1. Asking Action on Access to establish a target group of institutions and work specifically with them to improve their retention rates. 2. Bringing together of Aimhigher: Partnerships for Progression and Excellence Challenge under Aimhigher to create a more unified message for potential students. 3. Ensuring that additional relevant information is put on the Higher Education and Research Opportunities (HERO) website to assist potential students make informed decisions. 4. Working with the Department and other partners to establish a new HE Students Portal (HESP) which will provide a dedicated information service to students, their parents and advisers.

HEFCE will take further steps in line with the proposals in the White Paper to ensure universities and colleges will be properly funded for the extra costs of attracting and retaining students from non-traditional backgrounds.

The HEFCE have allocated £265 million to institutions in 2003–04 for widening access and improving retention. This figure recognises the additional costs of supporting students from non-traditional backgrounds and thereby increases the likelihood that they will complete their courses successfully. We expect HEFCE to come forward with further proposals for 2004/05 on how they intend to implement White Paper proposals on funding HEIs who are not making progress on improving completion rates.