12/06/2015 10:15 BST | Updated 12/06/2016 06:59 BST

Reducing Student Grants Is Not Fault-Free and Affects Poor Students Most - But It Is Better Than Some Alternatives

Reports that the Government are thinking about reducing or abolishing maintenance grants in favour of bigger maintenance loans are, in one sense, not a surprise. At the recent general election, all the main political parties promised to squeeze the Department for Business, Innovation and Skills - which looks after higher education - until the pips squeak.

The department's budget largely goes on three areas: science and research; apprenticeships and further education (FE); and higher education (HE). As the first of these three areas looks set to be protected, the other two - FE and HE - are vulnerable. When Ministers ask officials what they can cut, the civil servants generally suggest the same things: extending loans in further education; reducing informal and community learning; and saving money on student maintenance.

Moreover, we know from a leak to the Guardian from 2013, that substituting maintenance grants with loans has long been worked up in detail by officials. We also know, not least from a recent publication from the Higher Education Policy Institute (of which I am the director), just why the policy is so favoured. Swapping maintenance grants for loans reduces the deficit, as not a penny of the money loaned out to students appears in the figures for the country's deficit - though it does appear in the national debt, at least until the loans are sold off to the private sector. This means that the deficit can be reduced by swapping grants for loans but, crucially, without actually reducing the cash in students' pockets. That matters because a student's rent can easily top £100 a week, with food, transport and course materials on top, and many students already face a big shortfall between their income and expenditure.

Reducing maintenance grants by, say, half would leave England looking more like Scotland, where the poorest students emerge from university with the biggest debts. Abolishing maintenance grants altogether would do this to an even greater degree - and it has been tried before, without great success. It is generally forgotten that Tony Blair, with the acquiescence of the National Union of Students, abolished maintenance grants in 1998. But New Labour themselves deemed the policy to be unsustainable and grants were reintroduced in 2004.

So the policy is not fault-free and will affect the poorest students the most. But it is better than some of the alternatives, such as cutting the number of higher education places, which would directly reduce the opportunity to study at a higher level, and the Government was elected on a mandate of reducing the deficit further.

At the recent general election, the Labour Party promised to reduce the costs to students. However, student funding turned out not to be the electoral force that some people expected it to be. That doesn't mean it never will be. In the future, there will be millions of thirty-something and forty-something voters who owe large sums to the Student Loans Company but who also need money for nappies and toys, not to mention childcare and mortgages. So, however reasonable student loans look on paper now, a populist politician of the future may find promising to cut their repayments is as powerful an electoral force as Margaret Thatcher's reductions in income tax were.

Nick Hillman is the director of the Higher Education Policy Institute