Monday, 13 July 2015

Under 25 and at university? Bad news for you then.

If you were a student, last week’s budget wasn’t pretty. But if you descend from reasonable wealth and/or earn whilst you learn then watching George slay the maintenance grant shouldn’t have hurt too much. Students however, may now be saddled with more debt and this is surely bad for any mind beginning his or her life’s journey.



The maintenance grant currently available to students, which is £3,387 for those in households earning £25,000 or less annually, will be swallowed up by the current maintenance loan system. This will push the maximum yearly loan a student can take up to £17,200 for each year of study. For 4 year courses this could mean nearly seventy thousand pounds in student debt, whilst the average pay for graduates immediately after university sits at £18,000 a year.
Since the tuition fee hike, students from poorer backgrounds haven’t had to begin paying back their loans until their income hits the £21,000 threshold. This said, there is a sense amongst the student body, especially after the reneging on the liberal democrat manifesto promise in 2010 not to raise tuition fees, that no decisions surrounding the future of student loans are permanent. Government suggests this has not deterred university applications amongst students, and in particular those students from lower income households; The DWP quoted a 2% rise in attendance on last year. As a student myself, there is a definite feeling that this threshold could disappear or be lowered at any time and this worries many.

Despite this uncertainty, the student body seems as happy-go-lucky as they ever did, at least on the surface. But the fear of debt or it’s long term consequence is there, underneath all the loutish bravado or introspective geekyness. Although loans are not to be repaid until the £21,000 ceiling is breached, most students still spend their evenings in paid employment. 59% of students worked to fund their studies in 2014, up two percentage points on in the previous year and 35% of those asked by the National Union of Students, who provided the figures above, stated that they were working to avoid being in debt.

With the release of Osborne’s policy to increase the yearly amount of student loan available, I can only imagine that feelings of financial incumbency will grow and students will work more and more outside of their studies in order to mitigate against the accrual of debt.

During the budget George Osborne also announced the introduction of a national living wage for over 25’s. Most will no doubt welcome this but the majority of working students, especially those students who staff our supermarkets, our restaurants and fill the rolling plethora of casual vacancies that pop up countrywide, will only marginally benefit. Where the living wage for the over 25’s rises to £7.20 per hour in 2016, the Office for Budget Responsibility forecasts a minimum wage increase of up to 20p to £6.70. This is a meagre rise of £3.46 a week on a 16 hour week. That’s about the cost of a sandwich from my local garage I think, hardly enough to help.


One of the government’s central goals is to tackle Britain’s low productivity. According to Joseph Spooner of the London School of Economics, ‘Individuals struggling with debt difficulties may be unproductive in their employment due to the demotivating fact that the benefits of their labour will be spent repaying creditors.’ If students spend their time whilst at university subsisting on below average incomes that are in large part borrowed, even if they are offered a living wage, I doubt that this will contribute to higher productivity amongst the student population. Most students that do not have help from their families or come from low income households, and that have to work whilst at university will not have their standard of living significantly risen enough to make the debts they accrue seem less dooming. In my view this sense of indebtedness, which runs contrary to the Chancellors goals on raising productivity, is going to inhibit our young student population and even if access to higher education has remained unaffected, this sense of indebtedness means that going forward, students could end up flipping burgers or waiting tables instead of studying.