Judging by much of the media reaction to new figures on student debt, one would be forgiven for assuming that the principal aim of these commentators is to persuade aspirant students that university education should be given a wide berth. However, at a time when public sector debt, household debt and errant bankers continue to dominate coverage, we need to be careful how these figures are spun.
At first sight the new figures from Push might appear frightening. The cap on tuition fees is set to be raised from £3,500 to £9,000 and the average cost of a course is likely to be at the upper end of what is permitted. The new Push survey suggests that 'freshers' who start in 2012 and attend an English university can expect to rack up debts of in £59,100. Should prospective students be scared off?
The first point to note is that student debt is nothing new. As Push itself admits, those who start at university this year (i.e. before the cap on tuition fees is raised) will be set to owe an average £26,100 by the time they leave. So, yes, the figures will be much higher but university education has not been free for the user for years.
Second, it is easy to forget that the costs of a university education need to be set against the benefits accrued. It is estimated that graduates earn on average £100,000 more over their working life than non-graduates - about twice the Push figure. And, that's to say nothing of the other benefits of a university education, such as a more stimulating job, three years with like-minded people and new opportunities. So university, generally, is still a wise investment. If students can be armed with more information on career and salary prospects that flow from different university courses, then this could combine with the financial prospect to drive demand for the best value courses and universities.
But, to have a responsible debate on this, those studying for their A-Levels next year should also be reminded that formal student debt is very different from other forms of personal debt. Loans taken out through the Student Loans Company are subject to significant subsidy by the taxpayer. Graduates, therefore, only start repaying when they earn above a specific threshold, the debts are written-off after a period of time and the interests rates are subsidised. By design, your student debt can never become unaffordable or unmanageable.
In fact, under the current reforms, the salary threshold at which students will have to pay anything back is being raised to £21,000. And all debts will be written off after 30 years.
Therefore, under this 'pay as you earn' approach, student loans have more in common with a limited graduate tax than a normal commercial debt. Those who can afford to pay back will do so; those who cannot will not. No-one will have to face the upfront costs of university education.
If the impact on students is far from severe, these costs do pose significant challenges to Government.
With tuition fees clustering towards the upper end of the cap of £9,000, fewer students will repay their whole debt. In fact, academics and economists have estimated that the Exchequer will be unable to recover the costs of around 40 percent of its loans portfolio. To contain these costs the Government is having to limit the number of students through a quota system. This in turn, limits the scope for competition on cost and quality between universities. As the SMF first suggested in our report Funding Undergraduates , one answer may be to put more of the risk of loan repayment on universities themselves rather than the state.
In the situation as it stands, under these higher fees, students are likely to be more discerning in how and where they access university education - more may opt to study from home, to distance-learn or to take shorter degrees. The university market itself therefore has much re-setting to do to meet this emerging demand. But, it can only do so if universities are made to compete more actively for students.
Ultimately, prospective students need to be informed by a more mature debate on what and how they pay towards a university degree. Even then, these figures should generate as much conversation in the corridors of Whitehall and the Vice-Chancellor's office as outside the college on A-Level results day.
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