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



and the addition of grants and bursaries are taken into account, for all students from
poor backgrounds, the total payments required on graduation will actually be
lower
under the new system than under the old system. The opposite is the case for students
from richer backgrounds, the majority of whom would repay
more under the new
system, with the exception of females from the bottom 20% of the graduate earnings
distribution.

Figure . Distributional effects of new system compared to old system of HE
funding: net effects of i) increased government debt, ii) reforms to loan system,
and iii) reduction in requirement for private debts

Poorest students                  Poorest students

Percentile of the lifetime earnings distribution

New system, £18,340 govt debt

Pre-reform, £12,350 govt debt + £5,990 private debt, poorest students


Richest students                  Richest students

Percentile of the lifetime earnings distribution

New system, £18,340 govt debt

Pre-refcιm, £9,265 govt debt + £4,925 private debt, richest students


So although graduates in general will be asked to contribute more to the costs of their
education under the new system, the ones who as students were poorest will end up
repaying
less in loans than prior to the reforms. This is due to the combination of two
factors: first, the fact that they would not have to borrow as much money privately
under the new system, and second, the two changes to the loan repayment conditions

22



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