5. KEY ISSUES TO CONSIDER
When considering the various options presented, it is important to consider the wider context of the hard choices that have to made in developing a new student support system. The following sections cover some key issues which will hopefully be useful in setting out the wider context for these discussions.
Changing Economic Circumstances
The global economic crisis is increasing the pressure on all areas of the Scottish devolved budget and the Scottish Government has worked quickly to develop a 6 point plan to encourage development and investment and to help individuals and businesses. Our ability to react fully to this crisis is limited by the financial powers made available to us through the devolution settlement and the fact that we have to work within the budgets which were set in the 2007 spending review, before these pressures became apparent.
In responding to the options set out in this paper it is important to consider the likely economic impact of this investment in student support. Any move to increase the support available to students above inflation will boost their spending power quickly. On the other hand, replacing loans with grants has longer-term benefits as while it will not change the position for students in higher education, it will make things substantially easier for graduates who will leave with lower levels of debt.
Respondents may also wish to consider the potential impact that a change in the economic climate may have on students. For example, there is a fear that increased pressure on banks may cause them to reduce lending to students. Reducing access to commercial sources of finance may have implications for student support.
Sustainability and affordability
For any Government setting out a system of student support perhaps the key issue is how to create a system which is affordable and sustainable for the taxpayer, while providing an adequate level of support for students while they study. One of the key arguments for student loans is that it is not sustainable to pay grants when there are high levels of participation, so loans are the only affordable way to support learners.
We do not believe that loans are the best solution for supporting learners. At the moment, annual budgets for student loans across for HM Treasury and the Scottish Government are higher than they would be for grants. This will remain the case for some years and while there may come a time in the future that loans do support themselves (when repayments equal advances), that still seems some way off. These arguments about sustainability also have to be balanced against what is best for the individual.
Simplify the system
While it may prove to be more expensive to provide grants in the longer-term, we believe that this would be justified as it provides a better deal for our learners. It would ensure that financial opportunities did not dictate what choices our all our potential students had to make on entering and leaving higher education and it would create a simpler system.
Graduates and their contribution
The other argument most commonly used to support loans is that the graduate is the main beneficiary from their education so they should contribute more. Over the course of their working life, a Scottish graduate can expect to earn around £125,000 16 more than a non-graduate. This means that they contribute more to the public purse throughout their life through the Income Tax system.
If graduates earn more as a result of their degree, they will put more back in by paying more tax and the higher the return is for the individual, the higher their contribution will be to the state. In addition, society benefits from the advantages of having a more highly educated population. The wider benefits of higher education are well documented, better health, a more developed sense of citizenship and a greater level of engagement in society 17 as well as supporting the economy 18.
By charging for education, either through fees, or through contributions to living costs, you are effectively making graduates pay twice for the benefits that they are receiving. We do not believe that this is fair. Within a progressive Income Tax system, there should be no need for such additional charges on education.
Supporting wider access to higher education
Through the Learning for All19 agenda we are working closely with the Scottish Funding Council and institutions to make higher education accessible for all, regardless of background, circumstance or geography.
We have considered a wide range of evidence and research surrounding the impact of student finance on the behaviour of learners and widening access. While It is clear that finance is by no means the only influencing factor on access, it is clearly a significant factor for many. From the wide range of studies we have considered, some undertaken in Scotland and others more widely across the rest of the UK, some key themes emerge in relation to student funding.
- As you would expect, debt or the perception of debt has a more significant impact on those from lower income backgrounds. 20, 21, 22
- For many it can be a barrier to entering higher education at all. 14
- For others who chose to enter, it can limit opportunities, restricting options on where to study and sometimes what courses to chose. 23
- Term-time employment has grown 24 and students from working class backgrounds tend to have to work longer hours for lower wages 25.
- Financial pressures and the need to work longer hours can increase chances of drop-out. 26
- For those from lower income backgrounds, there is a more negative balance between the costs and benefits of higher education. 14
- Financial pressures are more acute on older learners and those from working-class backgrounds. 27
The student body is very diverse and there are a wide range of opinions as to what the ideal student support system would look like. What is clear from much of this research is that the demand for HE is still high and there are who many see the potential costs of higher education as a good investment. This has been reflected in overall participation rate in England with the introduction of fees. However, for a significant number - particularly those from less affluent backgrounds - the costs of higher education and the inevitable debt associated with this will either put them off entering completely or it will severely restrict their choices if they do participate.
As well as having different attitudes to debt, students in higher education also have differing financial pressures. Higher and Further Education Students' Income, Expenditure and Debt in Scotland 2004-0528 showed that students who were over 25, living with a partner or who had dependent children had the highest incomes, but also the highest expenditure.
As many of this group had financial commitments before entering higher education the financial pressures seemed to be most acute on them. Conversely, younger students staying in the parental home tended to have the lowest incomes and expenditure.
From the SAAS data we know that 19% of students supported by SAAS are classed as independent, so are not entitled to the Young Student's Bursary. We also know that around 55% of students stay away from home while at university, so are likely to face greater financial pressures from a number of areas including rent and rising food and fuel costs.
The overall picture from the income and expenditure survey is that while there are many students who clearly manage to live on the funds available while studying, there are others who experience real hardship. While many see debt as a significant barrier to participation, many also consider student hardship and the lack of resources while studying to be the main issue. There is clearly evidence available to support both sides of this argument. This leaves the question of how we design a system that can recognise and genuinely target those who need support most while doing what we can to make higher education truly accessible to all.