Ian Mulheirn at the Social Market Foundation has done the maths on the distributional impact of the Browne review proposals. The startling graph is shown below — note that those in the middle of the income scale pay more than those at the high end. This is Browne’s Middle Class Hump.
The two stand out points are:
– Graduates with an average income of £27,000 over the 30 year repayment period will pay back more than any of their contemporaries. (See the 40th percentile. This is because they repay the loan over a longer period, accumulating more interest than those on higher incomes.)
– Students with wealthy parents that pay the fees upfront will save up to £12,000.
As I blogged earlier, the upfront payment is one of the big political divides. One possible way around this is to levy a penalty on upfront payments (like a mortgage for instance). But of course this cuts the amount raised for the Treasury in the short term. ** Nick Robinson points out that there’s also an accounting problem. If the loan is forcibly extended over several years, it apparently is treated as a tax on the national accounts, which means the government would have to add student loan liabilities to the national debt.
Jim Pickard
Kiran Stacey