When Alex Winning learned that her university tuition
in England for the 2012-2013 year would be triple what her friends in college
now pay, she says the idea of that much debt upset her.
“It’s a lot of money to pay back compared to people my
age who won’t have that debt,” said Winning, 19, the granddaughter of Jamaican
immigrants who will shell out as much as 9,000 pounds ($14,450) a year to study
Korean language and politics. “It doesn’t seem fair.”
As the U.S. grapples with record-high college costs
and outstanding student loans of $1 trillion, England is embarking on a plan
this year that shifts much of the government’s burden of paying for higher
education to students and saddles graduates with unprecedented debt.
Some students in England, after borrowing for housing and living expenses, will leave school with as much as 40,000 pounds ($64,200) in debt, said Peter Lampl, founder and chairman of the Sutton Trust, a London nonprofit group that promotes access to higher education. That tops the $23,300 average debt of U.S. student borrowers. The debt burden means graduates will defer buying a home and makes it harder for people from lower-income backgrounds to catch up, Lampl said.
“In this country, we will be on an order of magnitude
ahead of the U.S.,” Lampl said in an interview. “We’re loading up these kids
with debt. The whole thing is an absolute disgrace.”
More Forgiving
While many English students will be borrowing more to
attend college, the system is more forgiving than its U.S. counterpart, said Steve Smith, vice-chancellor of the University of Exeter.
English graduates don’t have to repay their loans
unless they make 21,000
pounds a year. They pay 9
percent of their earnings over that amount and all debts are forgiven after 30
years. Payments are automatically deducted from paychecks. Graduates don’t have
to pay if they lose their job or transition to part-time work, as many working
mothers do.
A young person making 27,000 pounds a year will end up
repaying about 10 pounds a week and someone in their early 50s who owes 50,000
pounds has the reassurance that it will soon disappear, said Smith, who served
as president of Universities
U.K., an advocacy group that
consulted with the government on the changes.
The plan covers students at England’s 129 universities
and 186 vocational schools. Universities in Scotland, Wales and Northern Ireland have separate funding.
‘Brutal System’
By contrast, U.S. education debt can’t be discharged
through bankruptcy and almost 2 million Americans with student debt are over
60, according to the New York Federal Reserve. About $85 billion in student
debt was delinquent in the third quarter of 2011. In March, the Consumer
Financial Protection Bureau said U.S. student-loan debt had reached $1
trillion, based on preliminary findings.
“The American system is brutal,” said Tim Leunig, who
teaches economic history at the London School of
Economics.
The Obama administration introduced an income-based
repayment program in 2009 for U.S. borrowers who take out certain types of
federal student loans. The plan limits debt payments to a percentage of a
family’s income for graduates and erases the debt after 25 years. For those
with government or nonprofit jobs, the debt can be forgiven after 10 years.
About 630,000 U.S. borrowers are enrolled in the
program, while millions more are eligible, said Lauren Asher, president of the Institute
for College Access & Success, a nonprofit organization based in Oakland, California.
‘Really Big Loan’
Sarah Chelh, 18, from Hackney in east London, said she
was furious at the government for the fee increases and joined student
protests. She said she gave serious thought to not going to college at all and
looked at apprenticeships before deciding to pursue her interest in economics
at a university.
To improve her grades, Chelh took an extra year before
applying, a decision that will cost her three times as much for her first year
at college as the government phases in the higher tuition rates.
“It’s not fair,” said Chelh, whose parents are from Morocco. “I could have potentially paid for a couple of years of tuition or my
parents might have been able to pay. Instead, I’ll have to be taking out a
loan, a really big loan.”
Free Before 1998
Higher education in England was free until 1998, when
students were charged 1,000 pounds. The tuition increased to 3,000 pounds in
2006, and rose with inflation each year after.
In the U.S., the average tuition and fees for
2011-2012 at public universities is $8,244 (5,136 pounds) a year for state
residents and $28,500 at private schools, according to the College
Board, a New York-based nonprofit
group whose members include U.S. universities.
The new English system, unveiled in June by the
coalition government of Conservatives and Liberal Democrats, is designed to
reduce taxpayer support while introducing competition among universities for
the top students, said David Willetts, the Conservative minister for
universities and science.
Universities can now enroll as many of England’s best
students as they can attract, after years in which admissions were capped by
the government. Universities admitting lower- achieving students will face
reductions in their enrollment cap unless they charge less than 7,500 pounds.
‘Larger Agenda’
“It’s not simply a set of financing changes,” Willetts
said at a March conference of European university leaders at the University of
Warwick in Coventry. “There is a larger agenda. It is a model that does ensure
the sustainability of our excellent universities in Britain.”
The Higher
Education Funding Council for England, the agency that provides English universities with most of their
government revenue, cut its distribution by 19 percent to 5.3 billion pounds
for 2012-2013 from the previous academic year. Most of the cuts were in
teaching funds, and are expected to be replaced by student tuition. The
government will still pay for most university research, and will subsidize the
teaching of some expensive subjects like sciences.
HEFCE’s budget is 0.8 percent of estimated U.K. government spending for 2012-2013, according to Treasury data. The
U.K. spends 1.2 percent of its GDP on all higher education, including
vocational schools, compared to 2.7 percent in the U.S., according to the
Organization for Economic Cooperation and Development, using 2008 data, the
most recent available. The figures include public and private sources of
revenue, such as government grants, tuition and philanthropy.
‘Widespread Fear’
In the rest of Europe, where higher education is free or relatively inexpensive, governments are
watching to see if the U.K. plan succeeds, said Jens Oddershede, president of
the University of Southern Denmark in Odense, and the chairman of Universities Denmark, an advocacy
group.
It’s creating “widespread fear all over Europe” among
college administrators that the region will move toward a high- fee, high-loan
system, Oddershede said. He pointed to the U.S. model, calling it “a system
that can serve a capitalist society like America but wouldn’t work in a small
country like Denmark.”
The prospect of rising tuition angers European
students, who say they had no role in causing the financial collapse but are
being made to pay for it.
“What caused the debt?” Allan Pall, head of the Brussels-
based European Students
Union, said in a speech at the
European university conference. “Did we spend too much on higher education? We
should ask that question instead of rushing to cut the first thing we see, the
thing that creates jobs and growth.”
Student Applications
While students have protested, applications through
Jan. 15 fell just 1 percent, when adjusted for a decline in the college- aged
population in England, according to the Universities
and Colleges Admissions Service, which manages university applications.
That’s not surprising, given the importance of a
college education for finding a high-paying job, Lampl said.
“Poor kids, low-income kids know they have to get an
education,” Lampl said. “They’re not stupid.”
Asta Diabate, 18, who lives in Lewisham in south
London, said the higher fees don’t faze her.
“I’m not worried, because it’s something that’s
valuable,” said Diabate, who will start college in 2013. “It’s not like I’m
going to pay upfront and installments are so low, it shouldn’t really bother
me” when repaying the loan.
Repaying the Debt
While the plan was devised partly to reduce government
spending, it may ultimately cost more because many borrowers won’t pay back all
they owe, said Nicholas Barr, a professor of public economics at the London School of Economics. About 70 percent of the loans will
be repaid because of the 21,000-pound income threshold and the 30-year
forgiveness period, according to government estimates.
Instead of expanding access for students, university
spots will continue to be restricted, which will hurt the economy and social
mobility, Barr said.
Last year, 498,119
students applied for university
spots and 368,316 were accepted, according to the application service.
Winning, who hopes to begin her Korean studies in
September at the University of London’s School of Oriental and African Studies,
said her mother struggled to pay back a much smaller student loan after she
went to college.
“I’m afraid one day that I’m going to be stuck in that
mess,” Winning said.
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