Despite the increasing value of postgraduate degrees, there is no loan system equivalent to that for undergraduate students available to postgraduate students. This means that many are unable to access adequate funding and have to resort to potentially disastrous measures to get by. Annika Olsen discusses the recent IPPR report detailing a loan system that makes fiscal sense and addresses the issue.
This month saw the publication of yet another report on the social mobility crisis in postgraduate studies, this time from the liberal thinktank Centre Forum. The report echoes a chorus of other organisations calling for a fairer funding system for postgraduate studies, including the NUS, the Policy Connect HE Commission, and the 1994 Group. Indeed, as the report by the Policy Connect Commission points out, postgraduate study is increasingly seen as the ‘new frontier in widening participation’ to higher education, with the former social mobility tsar Alan Milburn calling it a potential ‘social mobility time bomb’.
There are good reasons for these alarming statements. First, there are significant wage gains associated with doing a postgraduate degree compared to doing an undergraduate degree. As Lindley and Machin point out in the CentreForum report, the wage gap between postgraduate degree holders and first degree only degree holders increased from 7% in 1996 to 14% by 2010. Elsewhere they state that across the whole education spectrum, graduates with a postgraduate degree have seen the biggest wage gains in the past two decades. Second, a postgraduate degree is increasingly seen as a requirement for employment in a number of sought-after professions, such as law, engineering, and biotechnology, as well as journalism, accountancy and academia.
Despite the increasing value of postgraduate degrees, there is no loan system equivalent to that for undergraduate students available to postgraduate students. While a very small number of students are able to access funding from Research Councils and other grant bodies, such funding is not available to the vast majority of potential postgraduate students. This situation strongly favours those students from well-off backgrounds, whose parents can help to meet the cost of their degree. For those unable to meet the costs, the lack of affordable postgraduate student loans has led to a worrying trend of postgraduate students resorting to potentially disastrous measures such as credit cards, overdrafts and personal loans to fund their studies. Others work part-time jobs alongside their degree programmes to fund their studies, but these students face uncertainty and an increased risk of dropping out if they lose their jobs or encounter other financial difficulties during their studies. There is therefore a clear need for a system of funding that enables all students who can benefit from postgraduate studies to do so regardless of their financial means.
Thus far, much of the discussion around a postgraduate funding system has been stifled by worries that it would lead to upfront costs for the government and would thus be fiscally impossible during a time of austerity. However, new research from IPPR shows that this need not be so. The final report of IPPR’s Commission on the Future of Higher Education, released 10 June, shows that it is possible to create a postgraduate funding system without significant upfront cost to the state, provided that the loans are paid back at a lower threshold than the current undergraduate loans.
The report’s suggested loan system, which was modelled by London Economics and based on the postgraduate loan system originally proposed by Tim Leunig, would see all students enrolled on a taught masters course as eligible to borrow £10,000 to cover the cost of their tuition fees. They would repay this at a rate of 9 per cent on any earnings between £15,000 and £21,000, with all other features of the loan system, such as the write-off period and interest rates, being the same as the current undergraduate loans. Because loan repayments would be made at a lower threshold than for undergraduate loans, the vast majority of graduates would repay the full cost of the loan. The RAB charge to the government (i.e. the amount of loan funding projected to be written off) would be just 6.9 per cent, with a long-term additional cost of only £41 million to the government.
Such a loan system would remove one of the main barriers that prevents less well-off students from studying a masters degree, namely access to finance. However, a few limitations would need to be recognised and dealt with.
First, although the overall cost to the government of introducing a postgraduate loan is very low, the government would have to borrow money in order to fund the loans, just as it has had to borrow money for the undergraduate loan system. This would add around £646 million to public sector net debt, but it would not count towards the deficit. Second, because the availability of loans would be likely to increase the number of students wishing to pursue postgraduate studies, the government would need to find a way to regulate the number of students receiving postgraduate loans. Such regulations would need to be crafted in a way that didn’t prevent the poorest students from entering the system. Third, in order to prevent universities from inflating the cost of their courses in response to the increased supply of finance for students, the government may need to regulate fees for postgraduate courses.
These challenges are similar to the challenges facing the undergraduate funding system, so it should be feasible to implement equivalent regulations – such as student number controls and fee caps – to a postgraduate funding system. Implementing a postgraduate loan system, despite these challenges, would be well worth it because doing so would unlock the potential for postgraduate study to expand opportunity, while mitigating its potential to reproduce patterns of privilege and disadvantage.
Postgraduate study serves as a gatekeeper to some of the most sought-after jobs in our economy, and it plays a key role in bringing workers up the wage ladder. Universities are places where those who go on to hold leading positions in our political and economic life are educated and socialised, and our higher education funding system plays a key role in ensuring that our future elites are as diverse and representative of the society around them as possible. For these reasons, the introduction of a postgraduate loan system is crucial not just because it improves social mobility and fairness. As Alan Milburn makes clear, it is also a ‘necessity for our economy and wider society’.
In recent decades, we have made some welcome improvements in widening participation to undergraduate studies. But those gains risk being lost unless we also establish a fairer student funding system at the postgraduate level.
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Annika Olsen is a Researcher at IPPR. Before joining IPPR in February 2012, Annika worked in the Faroese Section of the Danish embassy in London. She holds an MPhil with distinction in modern society and global transformations from the University of Cambridge, and a first-class BA in politics and sociology from the University of Sussex.