The Garrulous Jay – Taken For Granted

Readers of a certain age may fondly recall the satirical comic magazine Viz. It reached peak popularity in the early 1990s and featured such legendary characters as Biffa Bacon, Finbarr Saunders and Buster Gonad.

Another member of the Viz line-up was Student Grant – ‘real’ name unrepeatable – who was known for his catchphrase “students are really feeling the pinch”, despite his own profligacy.

It will not be lost on those who remember Student Grant from the magazine’s heyday that the joke no longer works in the way it once did, with grants for tertiary education now having been replaced with ‘loans’… And the student loan system is a mess.

One only needs to start at the beginning to get a sense of the absurdities in the current set-up: three different plans, all with their own terms and conditions, called Plan 1, Plan 2 and…Plan5!

A feature on BBC Newsnight on Wednesday, with MoneySavingExpert’s Martin Lewis, drew attention to the challenges embedded in the framework.

As Lewis pointed out, particularly with reference to Plan 2 loans where the interest rate charged is normally the Retail Price Index plus up to 3%, there are at least four ‘problems’:
•    First, the almost complete absence of education about the debt being provided to the students taking it on;
•    Secondly, fiscal drag meaning that more students are starting to pay more tax sooner than they did in the past;
•    Thirdly, inflation meaning students with Plan 2 loans have seen their interest rate go up at the very same time as inflation has increased their living costs;
•    Finally, the so-called ‘graduate premium’ in terms of earnings versus those that have not been to university diminishing, with the possibility this will be exacerbated by AI in the future.

Pity then Dr Arthur Joustra, the trainee paediatrician who also featured in the Newsnight piece, and who graduated in 2022. Dr Joustra left university having borrowed £55,000. Since then, he has paid £10,000 into his student loan, and today the balance on his debt is £72,000.

Presenter Victoria Derbyshire clearly found this hard to comprehend, reacting with a simple, “Oh God!”. I suspect, however, the good Doctor’s predicament is familiar to many students.

For today’s undergraduates Plan 2 loans, with their RPI ‘premium’ interest rates, have been replaced by Plan 5 loans, but it’s not all good news for them either. At £25,000 the repayment threshold is lower than that for their forebears, and the repayment period for those that don’t repay early has been extended by a decade to 40 years.

This raises the bizarre prospect of graduates paying off their student loans with money from their private pensions.

I think the current system is unsustainable both from a policy perspective and for graduates and their families, particularly as the more the notional debt grows the more of it is never likely to be repaid.

With no obvious ‘solution’ in sight, I would just encourage students and their families to do their homework before, as Student Grant would say, they start “really feeling the pinch”.