Virgin Money boss to review student support system

26 October 2016, 11:57   By Samantha Smith

THE Scottish Government have launched a review into the financial support system in place for students in Scotland, as student debt continues to rise faster in the country than anywhere else in the UK.

virgin money branch
Credit: Roger Utting/

Being chaired by the CEO of Virgin Money, Jayne-Anne Gadhia, the review aims to evaluate whether the current system is delivering the "most effective support for the poorest and most vulnerable students".

It will also investigate "the balance of support available" to university students, as well as the repayment conditions attaching to student loans and debt.

Yet in a fraught economic context where all available signs suggest that the Scottish Government's budget "could be cut by between 3-4 per cent in real terms by 2020-21", the possibility of the review advocating an increase in grants is decidedly slim.

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According to such groups as the National Union of Students Scotland, an increase in these grants is vital, if only because the alternative is skyrocketing student debt.

With their budget of £100.6 million being reduced by 35% between 2012/13 and 2013/14, they were partially replaced by student loans, which saw the level of student debt in Scotland jump by a staggering 58% in the 2013/14 academic year.

This rise meant that, in order to pay for their living costs in 2014/5, the 24,700 students from households with an income below £17,000 withdraw an average loan of £5,870 per year [PDF].

By contrast, the 2,890 students from households with an income of above £34,000 took an average loan of £4,600 per year.

Put simply, this means that the reductions in non-repayable grants - which in 2013 were capped at £1,750 a year - have had a disproportionate effect on students from less affluent backgrounds.

Indeed, the Commission for Widening Access even reported [PDF] in March this year that fears of debt were deterring poorer students from choosing the best courses at the best universities.

Unlike their English counterparts, Scottish students are more likely to opt for a university close to home so that they can avoid having to take out a loan to fund their attendance.

Some, claim the NUS, are leaving further education altogether, with the upshot being that the proportion of students from non-professional backgrounds entering university hasn't risen anywhere near as fast as it could have.

Between 2011 and 2015, this proportion rose by only 0.2% to 26.8%, while in England it rose by 2.2%, from 30.9% to 33.1%.

Clearly, something is wrong with Scotland's seemingly idealistic system of zero tuition fees, and it's precisely for this reason that the Review of Student Support has been opened.

Questions and answers

In particular, the review has a remit consisting of the task, somewhat vaguely stated, of "exploring" three key questions relating to the student support system in Scotland.

The first will ask whether the system provides the most "effective" support for the "poorest" students in Scotland.

Given that recent statistics and reports have showed how the poorest students have been hit by lowered grants, it's unlikely that the system does provide such support from the perspective of students.

As such, it's probable that the review will simply evaluate effectiveness from the point of view of the Scottish Government's squeezed budget.

Since it has the second task of looking at the "balance of support available", this means that it could end up advocating for a decrease in the amount in grants awarded to students, and a corresponding increase in the amount in loans.

It might argue that this would allow in an increase in the overall quantity of student funding, a possibility which is made likelier by how the review's very own press release celebrated the fact that the average level of annual student support witnessed a 2% rise in 2015/16, to £5,720.

Yet because this rise was made possible only by a move away from non-repayable grants to loans, it's entirely conceivable that the review might call for more of the same.

Indeed, this possibility is further supported by the review's third question, which requires it to look at the "current repayment threshold and period for student loan debt".

In other words, it will examine whether the Scottish Government should change the conditions attaching to loan repayment.

At the moment, these conditions demand that students begin repaying their loans as soon as they've finished their degree and have begun earning more than £17,495 a year. They also ask that the loans are repaid at the rate of 9% of their income above the £17,495.

The review will therefore consider whether this rate and the threshold should be changed. In light of how it may call for an increase in the ratio of loans to grants, it could relax the conditions attaching to loans, as a way of softening and apologising for the blow of making student support more reliant on them.

Budgetary constraints

While this move towards greater reliance on loans and debt is still in the realms of speculation, it's made likelier by Scotland's budgetary woes.

For instance, Scotland's structural deficit was proportionally more than double that of the UK in 2015/16, standing at 9.5% of GDP in contrast to 4.0%.

This increase, to a total deficit of £14.8 billion, was in part brought on by a marked fall in the global price of oil, meaning that North Sea Oil revenues dropped from £1.8 billion in 2014/5 to £60 million in 2015/6.

In light of such a spectacular decline, and in light of Scotland's need to tighten the strings on the public purse, there isn't much chance that the Review of Student Support will urge the Government to go back to a system of student funding based mainly on grants.

Instead, it will call for more loans on hopefully more favourable terms, meaning that Scottish students - like those in England and Wales - may have to accept debt as a fact of their academic lives.

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