Student loans: a blight that we should not spread

The current UK setup can be a painful ordeal for many, and should by no means be used as a model for Ireland

Illustration: Jenny Corcoran

Following the €47.5m increase in higher education funding in the budget, three options have taken centre stage as possible structural solutions to university funding crisis in Ireland: a state-funded system, in which student contributions are abolished, increased state funding with a continuation of student fees (similar to the current system), or a student loan scheme similar to that of the United Kingdom.

As an Englishman studying in Ireland, the prospect of this third option, which would come into effect by my fourth year, is daunting, particularly after hearing the stories of friends back home suffering in the grips of the student loan just six weeks into university.

While “free at the point of entry” university with loans paid back if and when the student reaches a certain income threshold may seem like a very attractive idea, the reality can be far from it. This is not least because a potential debt £36,000 (€40,000), excluding interest,  is difficult to ignore, regardless of whether the income threshold is met. In fact, on a personal note, each one of my friends in England who did not choose to attend university named this enormous debt as a contributing factor in their choice.

This is a key problem with the loans system. Despite a major 2014 study by the Institute of Fiscal Studies into university funding estimating that around 73% of graduates in the UK do not pay back their loan (due to it being written off after 30 years), student debt remains a major deterring factor for prospective students.

This is evident in the fact that applications to British universities dropped by 7.7% in 2012, when it was announced tuition fees were to be raised, with a disproportionate statistical effect on those from working class backgrounds. Any way in which social mobility is limited or not encouraged can be costly for society, especially in the context of education.

In addition, the introduction of such a loan scheme could put future students in danger of significant fee increases. The promise of “free at the point of entry” university, the cost of which may never be paid back, gives the government an excuse to raise the overall fees.

This has been made clear in England by a steady increase in fees which are now the highest in Europe, the equivalent of €10,000 per year. While this is treble that of Ireland, fees here actually come in at second, according to a new report by the European Commission. This licence to raise fees with no obvious consequences can intensify the noted apprehensions felt by prospective students.

For many, however, it is not the actual tuition that poses the greatest financial problems in the UK, but the plethora of other costs that are supposed to be covered by various loans based on family income. And this is the crux of the argument, since it is these financial burdens that cause the most problems for the students in a “medium” social position or, to use one of Theresa May’s buzzword phrases, the “just about managing”.

Maintenance loans aimed at helping students pay for rent, bills, food, transport, social events, household goods and books barely scratch the surface, and the average student is left with a £3,000 deficit which, unlike a grant, needs to be repaid. On top of this, everyone knows horror stories of irresponsible students blowing their loans during freshers’ week, like one friend of mine who would buy rounds boasting that his student loan was just “free money”. While he was laughing, his wallet was screaming and, six weeks in (after dropping out of college) his parents were too.

Of course, this example is worked around by just being responsible, yet an all-too-common reality for the poorer end of the middle classes is that the maintenance loan is simply not enough. Take another example of someone I know, a member of the “about managing”. The first in her family to attend university, she was close to having to drop out if she couldn’t find regular work in her university city; the maintenance loan being insufficient to sustain her without the financial support of her family which, in this case, they could not provide.

A different person thought they had been scammed when they checked their bank balance to find it at minus £2,000, but discovered that their rent had been charged in full without the loan being able to cover it.

While these examples are rectifiable, why cause unnecessary stress to students in the most important stage of their education? Yes, the proposed loan scheme would reduce state contribution to overall higher education funding from 64% to between 55% and 60%, but is this narrow financial gain for the state worth the losses and problems on a personal level?

This financial gain may even be purely cosmetic, since the British government is owed over £100bn (€113bn) in student loans dating back to 2012 which may never be paid back, according to the Student Loans Company. I have only given an outline of what it is like under the UK system of student loans based on the experiences of half a term, so imagine the various trials and obstacles a less financially able student will face over a four-year course in terms of money management and mental wellbeing.

If Irish higher education looks to copy  a British system susceptible to ballooning college fees and maintenance costs anchored to a problematic income-dependent loan algorithm, alarm bells should be ringing for both the public and government.

While the reports suggest that the loans system will not be exactly that of the UK system, it is still important to use the UK as an example how not to do it. Indeed, the ongoing debates concerning the abolition of student fees put forward by the UK Labour Party, and already implemented in Scotland, shows that introducing loans would be a step in the wrong direction.

Some of the most pioneering European nations, who pave the way for progress across the board, have very small  if not negligible tuition fees , such as Germany, Norway and Sweden. Countries need not plunge their students into debt to retain a very high standard of higher education, and introducing a system of student loans in Ireland is certainly the wrong way to solve the crisis in funding for higher education.