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 Wednesday, 20 February, 2002, 12:31 GMT
What are the student funding options?
By 2010, half of all young people will go to university
Students are marching through London on Wednesday, demanding action to reduce debt and poverty.

Their banners say "Grants not fees", but it seems unlikely that there will ever be a return to the non-repayable grants system dismantled through the 1980s and 1990s.

Student loans
Repayments only when earning money
Repayments reflect actual borrowing

Graduates have large debts
Debts deter poorer applicants

By the end of the decade, the government wants at least 50% of young people to enter higher education.

And Conservative and Labour governments have both turned their backs on the model of non-repayable grants for all - which operated when only a small minority of young people entered higher education.

But there has still to be any agreement on what should take its place for students in England.

Graduate tax
Only charged when earning
No graduate debt

Not linked to specific cost
40 years tax for a three year course

The present government's combination of tuition fees, loans and support for students from deprived backgrounds, has been a constant source of dispute.

And in response to growing student debt and concerns that this was deterring applications to university, the government is currently reviewing student funding.

But what are the options?

Tuition fees, introduced by the Labour government, impose a means-tested charge at the beginning of each year.

This charge goes towards the costs of tuition and is separate to the loans system, which applies to students' accommodation and maintenance.

Non-repayable grants
Support for all students
Widens access to university

Very expensive
Designed for when students were small minority

Tuition fees have become a target of much hostility from students, not least because they have to be paid in advance, at a time when young people have the least money.

Opposition to this scheme in Scotland resulted in fees being charged after graduation - a tactical change which seemed to reduce much of the protests.

And the funding review could see a shift towards charging students after they complete their degrees - with the growing possibility of a graduate tax.

This would mean that people who had attended university would pay an increased level of taxation once they were working and had crossed an income threshold.

Ending debt

In political terms, paying through tax codes would soften the impact of up-front fees and it would end burdensome debt repayments and embarrassingly high levels of student debt.

This would mean that there would be no fixed amount to re-pay - and a higher tax would be justified on the grounds of a higher level of income for graduates.

And the added tax for graduates would only be one component in the complexities of tax bands and allowances.

It could also allow a fresh start to funding allowances, providing more generous amounts for students when they are studying - which would be raked back over the decades ahead.

Political sensitivities

But making it less attractive to an incumbent government would be the short-term financial cost, because the money would only slowly be returned to the Treasury.

And there could be political sensitivities about stealth taxes if a new level of taxation were to be introduced.

A graduate tax system would need to either replace or run alongside student loans.

These subsidised loans, provided by a centrally-approved lender, are now the main means by which students pay their way through university, covering living costs.

The loans, with low rates of interest, are not repaid until former students reach an income threshold.

But the loan system means that students leave college with large debts, which has proved unpopular.

And as the maximum loans are insufficient to live on, it means that most students also acquire more expensive debts, through bank loans and credit cards.

Widening access

Another option open to the government would be to re-launch the loans system, with larger loans and longer repayment periods.

An advantage of this would be to tailor repayments to the specific borrowing of individual students.

And it would also allow students to know that there would be an end in sight to paying for their university.

But the problem of large headline figures for student debt would remain.

Any system will have to offer financial support for students from poor backgrounds - and if grants are to return, it is possible that they will be used to target the least well-off.

In Wales, a means-tested grants system is to be re-introduced, with assistance available worth up to 1,500.

But even this is a long way from the old-style grants system, which once entitled all students to at least a minimum grant.

See also:

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