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

the removal of upfront fees, which reduces student reliance on external sources of
funding such as bank loans. In this section we will analyse each of these three aspects.

Note however, that in making comparisons across the two HE funding systems it is
important to emphasise that our analysis here is partial: it focuses on the impact on
graduates of the debt repayment element of these systems, but ignores how much
graduates as taxpayers would have been expected to pay, in tax, to raise the required
government revenue to finance these systems. We will return to this in Section 5.

Figure through Figure set out the differences between the old and new systems along
the above three dimensions. Each figure presents the distributional pattern of graduate
debt repayments under the new system as compared to the system being replaced. Due
to the substantial differences across males and females that are masked by considering
the whole graduate population together, as seen in the previous section, from hereon
we show all analyses separately by gender.

First we show the effects of the two new changes to the loan repayment conditions -
the provision for debt write-off after 25 years and the raising of the repayment
threshold to £15,000. By comparing the two systems for a given level of debt (here
fixed at the new system’s maximum level of £18,340), Figure shows that this
combination of reforms is progressive across the distribution of graduate earnings - it
reduces the amount that all graduates will have to repay, but reduces the amount for
the lowest earning graduates the most. The biggest gains clearly arise for
approximately the poorest fifth of women, who repay an average of around £3,600
less under the new system. These are the women who as we illustrated earlier, gain
from debt write-off after 25 years.

Figure . Distributional effects of new system compared to old system of HE
funding: effects of reforms to loan system (raising of threshold to £15,000 and
introduction of debt write-off after 25 years)

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