To be charged for a student loan or not to be charged, that is the question

22 March 2018
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Hamlet’s soliloquy is one I studied during my A-levels, while weighing up whether to go on to study for an English literature or a journalism degree.

I plumped for a multimedia journalism degree that incorporated an esteemed qualification, the NCTJ Diploma in Journalism – and the rest, as they say, is history.

Given I’d always fancied myself as a journalist, in hindsight, I’m pleased I studied a degree that gave me the practical skills needed to land a job on graduating – shorthand, media law, news and features writing, and the ability to film and edit radio and TV packages, among others. The course also included compulsory work experience modules, and this ‘real life’ experience was one of the factors that helped me land my first journalism job.

So graduating at a time when there were few opportunities for wannabe journalists trying to get a job straight from school, my degree was worth every penny. Well, penny is an optimistic way of putting it, considering the large sum of debt I’m slowly gnawing away at, but I feel I made the right choice.

I didn’t get a free education. But I still consider myself one of the lucky ones when it comes to student loans. My tuition fees were in the era when they cost a rather hefty £3,000 a year, and that’s not including the maintenance loans added on top. The interest rate on this debt meanwhile, is 1.5%.

Yet for those who started a university education in England and Wales (it’s different in Northern Ireland and Scotland) since 2012, tuition fees have tripled to a cap of £9,250 a year and the interest rate for these students is a much higher 6.1%.

The whole system is a mess. Firstly, there’s the confusion of different student loan systems depending on where you’re from in the UK and where you study. We’ve then got the added maze to navigate of different tuition fee caps and interest rates depending on when you studied. And your loan interest rate can change each year depending on the calculations used to set it.  

For example, I’m in the cohort of those who started university in England and Wales between 1998 and 2011, where loans are based on the Bank of England base rate (which is currently 0.5%) + 1% or March’s retail prices index (RPI) measure of inflation – whichever is lower.

There’s another cohort who joined pre-1998 whose interest rates are currently 3.1%. Theirs are set using the same rate as March’s RPI figure. And then you have the post-2012 starters. Their interest rate is set at 3% plus March’s RPI.

Looking at these figures, the post-2012 starters are really getting a bum deal. Research published by the Institute for Fiscal Studies found that in some cases, these students have racked up more than £5,000 in interest charges before they’ve left university.

Even the Prime Minister admitted earlier this year that “we now have one of the most expensive systems of university tuition in the world”.

Now, I don’t agree with the nearly one third (31%) of Moneywise.co.uk users we polled (see left) who think a university education should be free for everyone, nor do I think those with vocational degrees should be prioritised as more affordable – but I do agree with the quarter of people (26%) who think the high fees and interest rates are unfair and should be reformed.

It has been six years in the making – and with pressure from the National Audit Office and Treasury Committee – finally, the government has this year announced a review into university education. Its report will consider how the system can provide the best value for money for students as well as taxpayers in general, and how graduates should be expected to pay for the cost of their studies.

Before we get our hopes up, it’s worth noting that the review will take a year to conclude and who knows how long it’ll take before any recommendations are followed up on. But at least it’s a step in the right direction.