The Treasury Committee is to investigate the student loan system and the financial implications of tuition fees, joining two other committees also looking into higher education finances.
Lead by Nicky Morgan MP, the probe will examine the repayment threshold and interest rates as students face rates of 6.1 percent. It will additionally assess the impact of higher education on public finances and the viability of introducing a so-called ‘graduate tax’.
Mrs Morgan, the committee’s chair and former education secretary under David Cameron, said the Treasury Committee was appointed to examine government expenditure.
“Student loan debt is projected to be around £160bn within six years, and the government has announced that it will review the whole student finance system. The committee will scrutinise the current system and any future developments closely.”
Tim Bradshaw, acting director of the Russell Group of universities, was positive about the review. “We need a system of student finance that is fair for students, the taxpayer and for universities too”, he said.
“I have previously called for the interest rate attached to student loans to be looked at again and am pleased that this will be considered by the committee.”
The inquiry follows the prime minister’s promise to reform the student finance system earlier this month at the Conservative party conference in Manchester. In her speech, Theresa May announced plans to increase the loan repayment threshold from £21,000 to £25,000 for students that started university in or after 2012.
Mrs May also outlined that tuition fees will not rise by inflation next year for students in England. Instead of increasing by £250 they will be capped at their current level of £9,250 until 2019.
The Institute for Fiscal Studies (IFS) said Mrs May’s plans are “a significant giveaway, largely to middle-earning graduates, who are likely to repay around £15,700 less over their careers”.
The IFS also heeded that these reforms are expected to increase the cost of providing higher education by around £2bn per year, with the government’s actions to increase the proportion of graduates who won’t fully repay their loans to 83 percent (from 77 percent).
The decision to cap tuition fees has created uncertainty about the long-term funding of universities, and of the implementation of the Teaching Excellence Framework (TEF). The body, which awarded UEA gold in August, was introduced by the government in the last parliament to reward universities deemed to have a good teaching quality with the ability to raise their fees.
The first evidence session of the inquiry was held last Wednesday with Dr Helen Carasso and Dr Andrew McGettigan, who have both written on student loans, where it focused on the impact of student finances. Dates of future hearings are yet to be released.