Tuition fees and living costs are a growing burden on those seeking to continue their education after school.  Loans can mean that students leave university with debts of up to £50000. It is a frightening thought for young people and their parents who will, in many cases, end up footing some of the bill. Whilst most will accept that there is a limited pot of money available to divvy up between all the competing demands both in education, and in the budget as a whole, the question of the fairness of current arrangements is a serious one.  The move to leave Europe is not likely to help.  There are few who fail to see an economic downturn in the short term at least. But let’s look at some of the facts, and the alternatives, of the whole tuition fee situation. We can start with some good news… What is a student loan? The term loan is a little misleading.  Think of the debt as more like a contribution to the fees charged, with those with the highest earnings paying the most back. Unlike other ‘loans’, the money is not secured against anything.  Contributions are taken directly out of salary, or, for the self employed, through HMRC returns.  This means it is not possible to default. How much is repaid? Repayments are at a rate of 9% of salary, for earnings over £21000.  If your earnings are less than this, then there is no repayment. Martyn Lewis, founder of Moneysavingexpert, has carried out a lot of research on the whole subject of student loans.  He calculates that only those with a starting salary of £40000, with expected annual increases, will pay off the full amount of the loan in its thirty year life span. Those who do not pay off the debt have it wiped clear after this amount of time.   But now for the bad news… Interest Initially this was set at the rate of inflation, but was changed last year so that additional interest is charged depending on the amount you earn. Parental Contributions The living element of the loan is dependent on parent income, using a sliding scale.  If parents earn a combined total of over £25000, there is an expectation that they will contribute.  If they don’t, then the likelihood is that students will have less to live on. Don’t Pay Up Front Some parents have saved to pay the student loans up front in the well meant but misguided impression that it will save their children from the debt.  This is financially muddle headed.  Because there is the chance that their children will never earn enough to need to pay the debt – again, thinking of it as a contribution clarifies understanding – the parents will have wasted their money. And the even worse news Naturally, whilst the above is true at present, there is no guarantee of how long it will remain the case.  Would you trust this, or any successive governments to keep to their word?  Probably not.  Would you trust them to keep to a predecessor’s word?  Need we say more? Facing up to reality… Whilst hopefully any complete panics about the possibility of being in debt for life have been assuaged, 9% of income over £21000 is still quite a lot.  It is going to have an impact on saving for a mortgage, on living standards, on what graduates can offer to their own children further down the line.   What are the alternatives to loans?  The short answer is, at the present time, not a lot. Return to the grant system This is of course a possibility.  One of the reasons for opening up tuition fees was to allow universities to become more competitive.  It hasn’t really happened, with them overwhelmingly charging the same as each other for most courses. One of the problems of the old grant system was that it was very open to manipulation. Encourage investment in savings policies These exist in any case, but it is asking a lot of parents to make an investment when their children are extremely young, and they themselves are at the low end of their earning potential. Prioritise University Education If spending is geared towards degree level learning, then this will reduce or eliminate costs to students.  It is, in part, what they do in Scotland, for Scottish students.  But even this is open to argument, with the most able and, in most cases, those with the highest earning potential having the largest amount spent on them. And the facts are that those pupils who are most likely to go on to university are those from a comfortable middle class background.  So this does not help with social mobility. However, a re-evaluation of spending in education is something that should happen.  It seems as though a lot of changes in recent times have been built on their vote appeal more than their educational worth.  Although it has moved to the back burner, the idea of creating more grammars is a case in point.  All the evidence points to the fact that grammar schools only benefit those who attend…grammars.  Everybody else ends up worse off. Maybe a proper assessment of benefits against cost might prove the point that more money needs to be spent on higher and further education.   The student loan system, if we can get away from the horribly misleading headlines, is reasonably fit for purpose, certainly no more open to criticism than the alternatives.   Some evidence exists that the system is actually not as hated by the students as by their parents, who of course went through a different funding process themselves. But what is really needed to secure trust in the loans is a permanent guarantee that, whichever party (or parties!) are in power, they will honour the commitments that have already been made. Now that really would be something. Alan Peters