Changes to student finance arrangements for 2012

The Department for Business, Innovation and Skills (BIS) has announced changes to finance arrangements for UK/EU students that will come into effect in 2012-13. Details can be found at www.bis.gov.uk/studentfinance.

The changes are based on recommendations from The Browne Review, which was an independent cross-party review of higher education funding and student finance in England. It was chaired by Lord Browne of Madingley and a report was published on 12 October 2010. For more information and to download the report, visit http://hereview.independent.gov.uk/hereview/report.

Following a vote in both the House of Commons and the House of Lords in December 2010, the following changes have been approved. These changes relate only to England.

• The cap on tuition fees for UK/EU students will be lifted, but still regulated. Universities will be able to charge tuition fees of up to £9,000 a year from 2012-13. However, universities that want to charge more than the new basic fee of £6,000 will have to meet additional conditions to promote access for disadvantaged students. Access agreements will still need to be approved by the Office for Fair Access: draft guidelines suggest that universities have the flexibility to devise their own access agreements according to their own circumstances. Universities will also be required to demonstrate to the government and to their students both improved standards of teaching and fair admission. Universities can charge below £6,000 if they want to and if they can afford to do so.

• As before, tuition fees will not need to be paid up-front by students. Instead students will be able to apply for a loan to pay their tuition fees, which will then be repaid after graduation through graduate contributions.

• Repayments on loans will begin when graduates reach annual earnings of over £21,000 a year, up from £15,000 under the current system. This figure will be updated annually in line with earnings from 2016, rather than every five years as originally planned.

• The repayments will be set at 9 per cent of income above £21,000 and all outstanding repayments will be written off after 30 years (up from the current 25 years).

• A real rate of interest will be charged on loan repayments, but with a taper. For graduates earning less than £21,000 annually, no real rate of interest will be applied to loans. However, for graduates earning between £21,000 and £41,000 a real rate of interest will be charged. This will increase by 0.15 per cent for every £1,000 earned over £21,000. Graduates who earn over £41,000 will be charged interest at RPI plus 3 per cent.

• Students will still be entitled to a maintenance grant of up to £3,250 for students with a household income of less than £25,000. However, the level of family income for entitlement to a partial grant has been reduced to £42,000.

• A flat rate maintenance loan of £3,750 has been proposed although a higher amount may apply to students at London universities. This will not depend on household income so all students from England will be eligible.

• For the first time, part-time students will be entitled to a loan and will no longer be required to pay up-front costs, as long as they are studying for at least 25 per cent of a full course load.

• Students from lower income families will be able to benefit from a new £150m National Scholarships Programme through such schemes as a free first or foundation year of study. The details of this new scheme are yet to be finalized, but there is concern that the new programme will be too prescriptive, with an imposition on universities to match government contributions in ways that are not of their own devising. At the moment it is unclear who will judge bids and against what criteria – it could be OFFA or some other body. It is also unclear how the money will be distributed and whether it would be possible for excellent bids from universities to be declined because the fund has run out.

The new student finance and fees regime will apply to all those entering university for the first time in 2012, irrespective of when they applied. For 2011 entry, universities will be charging £3,375 for full-time UK and EU undergraduate students. Students will remain on the same fee agreement for the duration of their course (£3,375 per year with a minimum annual increase in line with inflation). The new funding arrangements described above will only apply to students starting university from September 2012.

As all fees and bursary figures will change for 2012, students are advised to seek advice from the universities in which they are interested. The following few months are likely to be chaotic in terms of student finance, with universities having to change fee and bursary schemes in major ways. Websites will be updated as soon as new schemes are announced, so students will need to keep on top of these developments.

At StudentCash we will endeavour to update all our books as soon as funding arrangements are known. It is anticipated that books, therefore, will be available from June/July 2011. They will include information for both 2011 and 2012, where possible. If you require any further information about funding changes or our books, please visit www.studentcash.org.uk or email . For more information about Catherine Dawson and her books, please visit www.cedawson.co.uk.