Increase in student support could see graduates repay £5,000 more – think tank

Scottish graduates could see a £5,000 real-terms increase in lifetime student loan repayments if there is full take-up of new living costs support levels, according to a think tank.

The Scottish Government announced plans this week that will see a £2,400 increase to loan payments in the 2024-25 academic year.

Students will also be able to spread loan payments over a 12-month period rather than a nine-month period which is currently the case.

The earnings threshold above which Scottish borrowers make student loan repayments will also increase in April from £27,660 to £31,395.

Research by the Institute for Fiscal Studies (IFS) claimed that if there was a full take-up of living cost support, these changes would increase average lifetime loan repayments in real terms by around £5,000, and increase average loan write-offs by around £3,400 per student.

Analysis by the think tank also found that Scottish Government plans to increase costs in student support could result in a fall in student resources universities receive and fewer places for home students.

Following the Scottish Government’s budget for 2024-25, the IFS analysed key parts of its spending commitments including higher education.

The budget announced there would be a 3.6% cut in funding for universities’ teaching costs which, the think tank said, have already fallen by 19% over the last decade.

Kate Ogden, a senior research economist at the IFS and an author of the report, said: “Next academic year, Scottish students will be able to borrow much more to help with their living costs while they study.

“But the Scottish Government has made cuts to spending on undergraduate teaching in the 2024–25 budget.

“This will reduce further the per-student resources universities receive and also mean fewer places for new Scottish students.”

The report also recognised that Scottish universities are increasingly reliant on international student fees.

Fees for teaching students from outside Scotland were worth around £1.4 billion to Scottish universities in the 2021–22 academic year, accounting for around 30% of their total income.

Ms Ogden said: “Given the challenging financial position the Scottish Government faces, it is important to recognise that the Scottish Government’s commitment to free tuition comes with trade-offs.

“The Scottish Government spends around £28,700 more per student than it would if it were to adopt English arrangements for higher education funding and keep its four-year degrees.

“It is worth noting that around £4,900 of that spending benefits UK taxpayers, instead of Scottish graduates, through reducing UK government loan write-offs.”

Mary Senior, Scotland official at the Universities and College Union (UCU), said: “Students’ ability to study at university should be based on their ability to learn, not their ability to pay fees.

“Free university tuition is a policy supported by all the political parties, by students and the wider electorate.

“For free tuition to work, it needs to be properly funded. UCU has long argued for increased funding for higher education in Scotland and that the cost of teaching in universities is fully met by the Scottish Government.

“Ministers are happy to take the credit for a popular policy, but their failure to pay the bills can’t be sustained.

“Cuts of a fifth over the past decade to university funding mean it’s now time to reverse the underfunding and invest properly in universities and students’ education.”

A Scottish Government spokesperson said: “It is right that we are taking strong action to support students through the cost-of-living crisis with an enhanced student support offering which ensures people receive the support they need to attend university.

“Along with our firm commitment to free tuition, this is ensuring access to university in Scotland remains based on the ability to learn and not the ability to pay.

“That is why we are seeing a record number of Scottish students being accepted to our universities, a record number of full-time first degree entrants coming from our most deprived communities and why Scotland has the lowest student debt levels in the UK, almost three times lower than in England.

“New measures announced this week will provide support for students over the summer months, following the recent £2,400 increase to the annual support package which sees the main undergraduate funding package rise up to £11,400.”