Most Britons opposed to above-inflation rates of interest on student loans, and support harmonising rates
Key takeaways
- 44% say the government should write off some or all student debt, including 55% of graduates
- Among those who support writing off at least some debt, 36% back writing it all off
- 68% of Britons see £9,000 a year tuition fees as too high
- 76% see interest rates of 6% as too high, and 53% say interest rates should be harmonised across all Plans
- 63% say taking a 9% cut of graduates’ pay to repay student loans is too high
- 55% of Britons say it should be students, not the taxpayer, who should be funding universities
Student finance has hit the headlines in recent weeks. While previous rows have focussed on high tuition fee rates, this time the spotlight is on high interest rates, with graduates on the Plan 2 scheme highlighting how they are seeing their monthly repayments dwarfed by interest charges.
A new YouGov survey shows that Britons consider above-inflation rates of interest to be too much to charge graduates, and that they would support harmonising interest rates across all student loan plans. Most also think that tuition fees at the levels seen in England and Wales are too high, and that taking 9% out of graduates’ pay packets is likewise too much.
Indeed, many Britons support writing off at least some student debt – although this is not to say that they think university should be free, with most thinking it should continue to be funded by students rather than the taxpayer.
The public are divided on whether or not to write off student debt
Our survey shows the public are divided on whether to write off some or all student debt (44%) or not (41%).
Among those who support writing off an amount of student debt, 36% say the government should write off all student debt, while 35% think a portion should be reduced, such that they end up paying back less than they initially took out.
A further 25% prefer instead to effectively forgive additional debt accrued on top of the initial loan (e.g. via interest rates) so that students don’t have to pay back a lot more than they borrowed, but are still required to pay back at least the amount they borrowed.
These three figures respectively equate to 16%, 15%, and 11% of the entire public backing these debt forgiveness options.
Among graduates, support for the government writing off some or all student debt increases to 55%, although this group are divided in almost exactly the same way as the wider public in terms of how much should be written off.
Most Britons say £9,000 a year tuition fees are too high…
Fully 68% of Britons say that a rate of £9,000 a year for university tuition is too high, with only 16% feeling that this is about the right level, and a mere 4% seeing it as too cheap.
The public are more likely to say that the previous rate of £3,000 a year is “about right”, with 46% feeling this way – a quarter (25%) still feel that this figure is too high, while 15% now see it as too cheap.
The even older rate of £1,000 is more likely to be seen as too low (42%) than about right (35%).
And 51% of Britons see free tuition – as is the case for Scottish students at Scottish universities – is too low. Scots themselves are divided on this count – 46% say free tuition is about right, while 47% think students should have to pay more.
…most Britons say Plan 2 levels of interest are too high…
Current rows have focussed on the high rates of interest that students on Plan 2 have to pay. Those who took out student loans under Plan 2 are required to pay interest of inflation (RPI) plus up to 3% depending on the amount they are earning. At present, someone earning £51,245 or more would be paying a rate of 6.2%.
The public overwhelmingly see a similar interest rate of 6% as being too high (76%) – indeed most say the same of 5% interest (70%) and 4% interest (56%). Instead, the majority of Britons say that an interest rate that matches the rate of inflation is about right (57%) – although even here 18% still consider this to be too high.
Students on older and newer plans than Plan 2 only pay interest pegged to the rate of inflation*. Our survey shows that by two to one, the public think interest rates on student loans should be harmonised between groups (53%) rather than being left at different rates as they are currently (27%).
Given that the majority of the public are opposed to above-inflation levels of interest, this doubtless means that the preferred option for the bulk of respondents would be to bring Plan 2 interest rates more to the level of other Plans.
…and most Britons say the rate at which student loans repayments are deducted from salaries are too high
When graduates are paying their loans back, they pay back at a rate of 9% of their current earnings, on top of income tax and national insurance, and potentially other deductions. This can result in extremely high marginal tax rates for some graduates – a study by Tax Policy Associates showed that high-earning graduates with children could be subject to marginal rates in excess of 80%.
The public likewise see this 9% rate as too high, with 63% saying so. Were it reduced to 6% then the public are divided between 38% who still say this is too high, and 34% who see it as about right.
By contrast, if it were 3% – the lowest figure we asked about – then 46% would see this as about right, with only 8% now seeing it as too high (and instead 31% now beginning to see it as too low).
Most Britons do still hold to the principle that it should be students themselves who are funding higher education, not the general public
While the public are clearly unhappy with the financial squeeze being placed on students, that is not to say that they support moving to a system of free higher education.
A little more than half of Britons back the principle that it is the students themselves who should be funding their degrees, with 32% saying this should be through the medium of student loans and 23% via a graduate tax.
By contrast, one in three (32%) say that university education should be funded by taxpayers.
These results are broadly consistent with those from a long-standing YouGov tracker that looks more generally at the students vs taxpayer question.
Among graduates, support for taxpayer-funded higher education is 11pts higher, at 43%, compared to 48% who opt for one of the student-funded options.
* Plan 1 rates can actually go lower than the rate of inflation, as they are pegged to whichever is lower of inflation (RPI) OR the Bank of England base rate +1%
Results tables coming shortly
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