Today's announcement by Ed Miliband that Labour would double, not treble, tuition fees from the current £3k pa has prompted much vigorous discussion already. But what would be the actual impact for different income groups of the change in policy? To find out, I fed different figures into Martin Lewis's Student Finance Calculator. I made one assumption: that all students would need to take out the maximum maintenance loan to live on while studying. Here's what the figures show..." />

£6k versus £9k tuition fees: the real impact in pictures

Today’s announcement by Ed Miliband that Labour would double, not treble, tuition fees from the current £3k pa has prompted much vigorous discussion already. But what would be the actual impact for different income groups of the change in policy?

To find out, I fed different figures into Martin Lewis’s Student Finance Calculator. I made one assumption: that all students would need to take out the maximum maintenance loan to live on while studying. Here’s what the figures show…

Who pays nothing?

With fees at £6k…

… anyone whose salary doesn’t exceed £15,600 in today’s money.

With fees at £9k…

… anyone whose salary doesn’t exceed £15,600 in today’s money.

What if you earn the national average wage?

With fees at £6k…

… you pay back £24,940 in today’s money over the next 30 years.

With fees at £9k…

… you pay back £24,940 in today’s money over the next 30 years.

What will I be earning to incur the maximum debt?

With fees at £6k…

… if you have a starting salary of £38,300 you will have to pay back £72,890 in today’s money over the next 30 years (the same as you would with £9k fees).

With fees at £9k…

… if you have a starting salary of £43,300 you will have to pay back £90,200 in today’s money over the next 30 years (compared to £67,380 over 24 years if your fees are £6k pa).

What’s the impact on the wealthiest?

With fees at £6k…

… if you have a starting salary of £60,000 you will have to pay back £57,310 in today’s money over the next 14 years.

With fees at £9k…

… if you have a starting salary of £60,000 you will have to pay back £74,020 in today’s money over the next 17 years.

What do the figures show?

Well, if your starting salary after graduating is under £38,300 there is absolutely no difference between £6k pa tuition fees and £9k pa tuition fees.

But if your starting salary is more than £38,300 you will be better off under Labour’s proposed £6k pa tuition fees.

However, as Labour has said they will fund the cut to tuition fees by increasing the loan repayments for the wealthiest (and a tax on banks), we don’t yet know whether or by how much these wealthier graduates will benefit from Labour’s proposals.

Looked at in this way, it is clear students from poorer backgrounds will not benefit from the cut in tuition fee while they are students. Only those who earn above £38.3k per annum after graduating will actually benefit. Labour’s argument is that the poorest are put off by the fear of debt rather than the actuality, and it is this fear that the fee cut is intended to address.

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26 Comments

  • “it is clear students from poorer backgrounds will not benefit from the cut in tuition fee”

    You’re making an assumption that those from poorer backgrounds will not go in to high paid jobs. The Labour proposals will probably mean the wealthiest *graduates* paying less regardless of their financial situation before they entered university education.

  • That’s an excellent point Ewan. I’ve lost count of the number of times people on here conflate poor backgrounds with poor graduate salaries. The tuition fee debate is about the effect of repayments on different graduate income groups – which should have nothing to do with the background of the graduate (assuming, laughably, we live in a meritocracy).

  • All of this just demonstrates why we need a proper graduate tax rather than Miliband’s slightly-less-awful-than-the-coalition’s plan.

  • Daniel Henry 25th Sep '11 - 1:26pm

    Yeah. We should change our phrasing on that.
    It’s insulting to those students when we assume they’ll be lower earners.

    How about “Graduates who don’t benefit from the qualification” Vs “Graduates who hugely benefit from their qualification”?
    (Still a bit weak – needs more thought)

  • Daniel Henry 25th Sep '11 - 1:29pm

    Also, I think there’s a mistake in your “who pays nothing” section.
    You seemed to place the threshold at £15k rather than £21k.

    Just nit-picking! The main thrust of the article was spot on! :)

  • Don Lawrence 25th Sep '11 - 1:35pm

    In electoral terms, the detailed figures count for very little. He has simply gone for our achilles heel and we will have to live with it.

  • Daniel Henry 25th Sep '11 - 2:02pm

    Oh right… I just assumed that the maintenance loan would be part of the same loan with the same repayment terms. I learned something new today! :)

  • Keith Browning 25th Sep '11 - 2:07pm

    News and political commentators are still talking about the ‘cost of going to university’ makes it prohibitive for many.

    I suggest that the LibDems monitor the news media more closely and those organisations still saying this should be paid a visit by those who know better. Send the boys round !

    The Cons aren’t going to do it because it is in their interest to let the LDs continue to take a pasting on this issue.

  • “as most of those from poorer backgrounds will need to”

    My wife’s from a poor background, yet managed to pay her way through university and leave without any debt by working part-time (without any parental or instituional aid). It is perfectly possible.

    I notice in all the examples you’ve given above you have assumed that the maximum maintenance loan has been taken out. I guess your conclusions don’t fit other assumptions.

  • So what is Lib Dem party policy on this issue now?

    Is the assumption that the party will drop its opposition to fees and adopt the coalition policy instead?

  • Maria Pretzler 25th Sep '11 - 2:34pm

    Of course, what he isn’t saying is whether in return, universities will get some of their teaching grants back. I am not holding my breath, to be honest.

    Funding universities properly should be of paramount concern, because it is essential for the economy as a whole, but also for the students, since underfunded universities will not be able to give them a good higher education.

    This side of the equation is always neglected – politicians play politics with tuition fees, universities be damned. This is, in fact, one of the worst unintended consequences of introducing tuition fees in the first place. Universities are always at the mercy of politicians’ tactical use of this issue, and the long term planning which would be crucial to keep the sector competitive world wide becomes futile.

    One would have hoped that after what the LibDems went through in 2010, people would be a little be more cautious with this issue – but apparently not, if Ed Miliband manages to jeopardise university funding at the same time as making a U-turn on his original stance that he wants a graduate tax rather than tuition fees. I guess Ed Miliband took a leaf out of the record of Welsh Labour, which blatantly offered to send a good part of its Welsh higher education funds to England in order to subsidise those students who can afford to study away from home, while Welsh universities will see an even more serious funding gap than Labour’s policies have already produced during the last ten years. It got them votes – so who cares whether the university sector will be able to function?

    It’s the blatant cynicism and the callous disregard for Britain’s higher education and universities sector (which includes the students!) which really gets me.

  • I feel the main point of this announcement is being missed. It’s essentially a symbolic gesture which, I feel, is designed to wrong foot the Lib Dems as much as anything else. Sure, a policy which benefits the poorer far more than this one could have been proposed but as Lib Dems know to their cost, such policies tend not to grab the headlines because they hardly ever sound as dramatic. This announcement gives Labour an attractive sounding policy (tuition fees ‘slashed’ by a third) which will appeal to great deal of people concerned including the all important middle class far more than an announcement of something like improved grants for poorer students (which while better, would lose their media punch in the inevitable convoluted explanations and would also risk being construed as Labour tacitly supporting the Coalition’s £9000 cap).

    Additionally, the fact that Labour still DO raise the cap to £6k means they deflect the obvious comeback of being fiscally irresponsible, opposing everything for the sake of it, having no real alternatives, etc. etc. Should the coalition still try such a comeback, they risk reigniting the whole controversy or at the very least make themselves appear to be cruel money grabbers (the coalition appearing to be furious that students are being ‘let off’ with a mere doubling of fees rather that a tripling.)

    Basically I don’t imagine this announcement is designed to gain Labour vast amounts of support on its own. The intention, I imagine, is to lead Lib Dem MPs and pundits up the garden path in a hope they’ll make themselves look ridiculous. Charges that it doesn’t help the poor enough (regardless of how accurate these charges are) will generally be perceived by the public at large as absurd as they come from ministers that supported the rise to 9k in the first place. Essentially it risks making Lib Dem MPs, Ministers and even pundits look like horrendously hypocritical tribalists when they come out against it. It doesn’t matter how carefully the proposal is deconstructed or thoroughly criticized, Labour will counter with (and the media will probably take it up) that “Lib Dems oppose cutting tuition fees”.

    The Lib Dems have started to enjoy a slight recovery of late, thanks, in part, to the fact that the spotlight of media attention has swung away from the issues that show Lib Dems in a bad light (tuition fees, NHS reforms). This announcement is an attempt to bring the spotlight back to those issues and is probably a taster of what we can expect to hear from the Labour conference.

  • CentreForum will be publishing an analysis of this in a day or so, using Labour Force Survey data to capture the range of graduate earning trajectories. http://www.centreforum.org for those who are interested…

  • Peter Chivall 25th Sep '11 - 8:29pm

    At first I thought “Damn, Milliband’s stolen an idea we could have used in 2015″, in a purely LibDem Manifesto which could use a relaxation of austerity (or lots of land value taxation!) to return £1bn to University tuition grants and reduce the cap on fees. Instead, if we play it right, we can say that Ed M. has come to agree with us that fees had to rise and we can then agree with him on the new £6000 cap after 2015. Where that leaves those Labour MPs who also signed the Pledge in 2010 would be interesting.
    In any case, the new NUS leadership has already condemned Millibands £6000 as ‘agreeing to a doubling of fees’ and ‘only the wealthy benefitting’. Goody!

  • “as most of those from poorer backgrounds will need to”

    My wife’s from a poor background, yet managed to pay her way through university and leave without any debt by working part-time (without any parental or instituional aid). It is perfectly possible.

    I notice in all the examples you’ve given above you have assumed that the maximum maintenance loan has been taken out. I guess your conclusions don’t fit other assumptions.”

    Well that depends on how much you earn, and what kind of fees you would be paying.

    If your wife was studying part time before the fee hike, then she would have paid lower fees that were subsidised by the government (that subsidy has been entirely removed) regardless of whether she took out a grant or a loan.

  • Milliband isn’t stupid. Tuition fees is not a big issue for the general public and Vince’s solution is actually better for the poorer students as argued above. Surely a principal reason for bringing the issue back into the spotlight is a not too subtle reminder that we betrayed a signed pledge big time. If I were a Labour campaigner I would repeat the reminder that the Lib Dems lacked principle on tuition fees and sacrificed our crredibility.

  • Oh Dear navel gazing again and missing the point, The upper middle classes will simply pay for the fees upfront or month by month by DD as they do now for their childrens private school fees now. Only the working class will take these loans. The poor paying for the education of the poor. We need a real graduate tax! This in not, even though it is nice to pretend that it is as it hides the real truth.

  • “Tuition fees is not a big issue for the general public and Vince’s solution is actually better for the poorer students as argued above. ”

    Tuition fees is a massive issue – di dyou not notice the riots? There may be a significant proportion of the voting population that thinks fees are OK, but that’s because they have already had their education paid for (by their parents’ generation) or they didn’t go to university. As the old die and the young get older, the voting population will increasingly reflect the anger at tuition fees.

    As to poorer students: for the vast majority of people that go to university, the whole point is to get a better job at the end of it (especially those from poor backgrounds who see education as a means to bettering their circumstances). The fact that the current system is benevloent to low earning graduates is meaningless to those from poor backgrounds that want to get a decent job. If they get themselves a decent job then they will get hammered by the fees; fees that disproportionately hit the middle of the graduate income scale, leaving low-earners and high-earnerswith less money to pay.

    Tuition fees are a good system if you want to become a doctor, lawyer, work in the City, go on the dole or work in McDonalds but very bad if you want to become a teacher, social worker, engineer, scientist and a hundred other middle income jobs.

  • Old Codger Chris 27th Sep '11 - 8:40pm

    @Dave_Skate “The upper middle classes will simply pay for the fees upfront or month by month by DD as they do now for their childrens private school fees”.

    I’m not so sure. It’s a subsidised interest rate so maybe the upper middle classes will borrow to the max while earning interest on their savings – and being upper middle class they may be able to lock up a large sum for a fixed term and hence get maximum interest. And/or they may buy a student house, get rent from their son / daughter’s housemates, and hope to make a profit when they re-sell.

    Isn’t that one reason why a graduate tax would be fairer than a scheme which may cause a £191 billion black hole for taxpayers? http://www.telegraph.co.uk/education/educationnews/8769269/Government-will-take-35-years-to-recoup-tuition-fee-losses.html

  • Old Codger Chris,

    ” I’m not so sure. It’s a subsidised interest rate so maybe the upper middle classes will borrow to the max while earning interest on their savings ”

    I doubt they will until it becomes clearer what the early re-payment charges will be! I cannot believe a decision on this has not been made! Again we are stuffed with this one. If we say you cannot re-pay early we will be labelled loan sharks. if we allow early re-payment we certainly cannot claim the system is progressive, even if it is now which is very questionable.

    You are right the only truly progressive system is to either introduce a graduate tax or raise it through general taxation.

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