The government has announced the introduction of income-contingent loans of up to £10,000 for students under 30 years of age undertaking a postgraduate taught master’s course. The loans will be effective from the academic year 2016-17 and will be repayable upon similar terms to current undergraduate loans, with repayments occurring alongside an undergraduate loan if applicable. The student will not repay the loan until they are earning over a threshold of £21,000; the government has provisionally suggested that repayments will be 9% of income above this threshold, frozen for 5 years, with interest added to the loan of RPI + 3%. These details are yet to be confirmed, and are subject to further consultation. The loans are designed so that, on average, individuals will repay them in full, but at a more favourable rate than a commercial loan would offer.
As a temporary measure to support students in the academic year before the postgraduate loans take effect, the Higher Education Funding Council for England (HEFCE) will provide £50million of funding to universities to offer bursaries on a match funded basis for 2015-16. These bursaries will be worth £10,000 each, and will benefit 10,000 students.
The government estimates that the new loan system will benefit 40,000 students each year, and will enable approximately 10,000 more individuals to undertake postgraduate study every year.
As the proposals are still in an initial stage and are subject to further consultation, the finer details are yet to be announced. The following are areas of uncertainty in relation to the scheme.
- Terms of repayment. The initial suggestion of repayments of 9% of income above a threshold of £21,000 for a loan with an interest rate of RPI + 3% will be subject to further consideration- including, whether the terms will be affected by concurrent repayment of an undergraduate loan.
- Terms of borrowing. The loans are described as ‘income-contingent’, and the nature of this contingency is yet to be announced. The loans will be up to a maximum of £10,000- so it could be assumed that a sliding scale will operate, based on income, below a certain level- as is the case with undergraduate loans. This has not been confirmed.
- Take-up. The government has made estimates as to the take-up rate, but this is difficult to accurately calculate. It may be that a vast majority of the 25% of students who have an award of financial backing from non-government sources would favour a government loan- the government believes only 40% of this group would do this. The government predicts an uplift of 15% of students wishing to undertake postgraduate study, with an additional 15% deferral rate from 2015-16 to 2016-17 entry. These figures are just predictions, and depending on the funding made available, actual numbers may significantly impact upon the loans offered. These predictions could also be shaped by recent changes to the terms of undergraduate loans- it is unknown whether the levels of debt incurred by those taking out undergraduate loans will affect the number of students wishing to continue to postgraduate study.
- Fees and university support. The new system of loan support may lead to universities changing the nature of the bursaries they offer, or altering their fee structure. This could have a dramatic effect upon the postgraduate landscape.
Sources of Further Information
Autumn Statement in Full (pages 43 and 44) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Accessible.pdf
Autumn Statement Policy Costings (pages 56 and 57) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382330/AS2014_Policy_costings.pdf