lifetime earnings. Notice that the taxpayer subsidy for additional fee increases are
greater than the average subsidies calculated for the full £18,340 loan (Table 4), since
the income contingent system combined with the zero real interest rate means that
each additional £1 borrowed comes at a greater cost to government and smaller cost to
the borrower. Clearly any increase in the fee cap would boost universities’ income,
but at the same time would put considerable upward pressure on public expenditure,
unless the system of loan subsidies were reformed.
Figure . Taxpayer and graduate contributions to a rise in the fee cap from £3,000
to £5,000
Note: Figure shows median payment by decile group of lifetime earnings
distribution.
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