IFS provide additional figures for HE financial changes

In yesterday’s blog, I stressed that the IFS analysis of the proposed changes to the financing of undergraduate study in England did not show how the repayment threshold freeze would affect those students who had also seen full maintenance grants replaced with loans.

I went back to the IFS to ask them about that. Dr Jack Britton the report’s author kindly ran the analysis.

On page 17 of the report the IFS summarised the effects of higher maintenance loans on future repayments.

We estimate that 65% of students who would have been entitled to a full maintenance grant are likely to experience no change in how much they can expect to repay (as they would not have paid back their old lower loan in full, let alone their new higher loan). Of the remaining 35% of those students, the average student will be repaying their loan for an extra four years, contributing an extra £9,000 towards their degree.

When you add in the effects of the proposed repayment threshold freeze the results are that the extra £9 000 contribution rises to an extra £13 000. (All these sums are Net Present Value calculations for 2016 based on the government’s discount rate of RPI plus 2.2 per cent. A brief explanation of NPV can be found here.)

Overall the two proposals would see on average students eligible for a full grant make £3000 in additional contributions owing to the move from grants to loans and then £7000 with the repayment freeze. You can see the higher earning 35 per cent drag this average up, but that group also has a significant impact on the repayments of the whole cohort’s higher earning deciles.

On twitter, IFS has provided a reformatted version of its ‘Figure 4’.

For deciles 1-6, there is little impact from the additional debt associated with replacing grants with loans, but the repayment freeze (olive bar) increases the costs of undergraduate study by a quarter or more.(Again, if the government were to implement this freeze for those who have already taken out loans it would be a large retrospective price hike, even though a freeze sounds like a minor change).

For the higher earning deciles, the replacement of grants with loans has the bigger impact as the new figures above illuminate.