Higher education funding reforms in England: the distributional effects and the shifting balance of costs

been replaced. Some example maximum government debt levels under the old and
new systems are shown in Table at four different parental income levels.¹⁸

Table . Expected* levels of debt on graduation under the 2003-04 and new

systems (at 4 example levels of parental income)

⅛r-.     .111.111     .1           .  .  1   .      111         ∙                . 1          ∙1 1 1      1   1  .1     .        1   .1

Expected debt levels show the amount students could borrow in government loans available under both systems, plus the
private debt that would be required under the base system to reach the standard of living achievable through maintenance loans
and grants under the new system. The figures relate to students living away from home outside London on a three-year course for
which the maximum fee is charged. All amounts are expressed in 2006-07 prices.

The Table also shows “External funding”, which is that amount of non-government
funding that students under the 2003-04 system would need in order to attain the same
standard as living whilst in university as under the new system, whether by borrowing
or other means. The higher availability of resources that can be put towards living
expenses at university under the new system is mainly due to the removal of the
requirement to pay upfront fees and/or the introduction of grants.¹⁹

For all of the subsequent examples we assume an initial debt level of £18,340,
representing the maximum amount of government loans available to those with family
incomes below around £35,000. As the variation in maximum debt across parental
incomes is relatively low compared to the size of the overall debt, repeating the
forthcoming analysis over different maximum debt levels, would not change
inferences much.

18 There are currently no reliable data on what percentages of students fall into different income
categories. Based on its 2006-07 data on grant take-up from the Student Loan Company (SLC) we can
obtain some indication however. Around 23% of HE students receive the full grant (parental income
below £17,500), 17.5% of HE students receive a partial grant (parental income below £33,500), and the
remainder receive no grant. However, a caveat is that around 20% of students do not apply to the SLC.

19 External funding is calculated as the difference between the upfront support for living expenses
under the new and old systems. Under the old system, upfront support is equal to maintenance loans
minus upfront fees. Under the new system, it is the sum of maintenance loans, grants and bursaries.

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