Universities minister says those struggling to live on maintenance loan can choose to get by in other ways

This article is more than 2 years old

This article is more than 2 years old

Students facing high living costs at university can choose to live frugally and it is not always up to parents to supplement loans, universities minister Jo Johnson has said.

Responding to questions about the pressure on parents to supplement maintenance loans, the minister conceded there may be a gap between the loans provided and the actual cost of living at university.



He said that did not mean parents had to fill the gap. Some students chose to work to supplement their loan, some saved before beginning their course and others chose to be frugal and live modestly.



Universities minister Jo Johnson.

The minister was taking part in a fringe event at the Conservative party conference in Manchester on Tuesday with consumer finance expert Martin Lewis, who argued that means-tested maintenance loans did not cover the cost of living and parents were struggling to fill that gap.



Lewis, who led an independent taskforce looking into student finance, said the cost of living was now the biggest problem students faced when going to university, with loans falling short of expenditure on accommodation and other living costs.

The minister said there may be a gap but added: “That does not necessarily mean it’s a gap that has to be filled by parental contributions.



“There are many other ways in which students could fill that gap. They can work, as many, many students do. They can also save, and then of course they can borrow from their parents if they wish, but it isn’t necessarily a parental contribution.”



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Johnson continued: “What is also so important to bear in mind is that students have many different choices about the kind of lifestyle they want at university.

“Some students want to live very modestly and have a frugal existence, focusing on their studies. Other students may want a different lifestyle but there isn’t one cost of going to university – it’s a very specific choice that each individual will make.”



Johnson’s comments came as the Institute for Fiscal Studies thinktank (IFS) said Theresa May’s offer of loan repayment relief for graduates in England would cost the government an extra £2bn a year.

The prime minister’s announcement means recent graduates will start repaying their student loans when they earn £25,000 a year, instead of £21,000, which will result in fewer people than before paying off their full debts, the IFS found, with the government picking up the difference.

Johnson defended the government’s earlier controversial decision to hold the threshold at £21,000, a five-year freeze announced in George Osborne’s final autumn statement in 2015, saying earnings had not grown as quickly as had been anticipated.

But Johnson welcomed the government’s recent commitment to raise the income threshold as an important change.

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He said it was vital the government had flexibility to be able to make modifications to the system according to circumstances.

According to the IFS study, the rise in the repayment threshold will cost the government £2.3bn a year. The move will save graduates in England earning more than £25,000 a maximum of £360 a year, with the thinktank’s analysis showing that the greatest gains will be made by those paid above the graduate average.

Chris Belfield, one of the report’s authors, said: “Raising the repayment threshold to £25,000 is a seemingly small change to the student loan system, but it will save middle-earning graduates up to £15,700 in repayments over their lifetimes.

“This comes at a considerable cost to the taxpayer, raising the long-run cost of providing higher education by £2.3bn per year, an increase of 40%.”

The IFS estimates that 83% of graduates will not pay off their student loans in full and the proportion of outstanding loans the government have to write off – the resource accounting and budgeting charge – will rise

In a lively session entitled “Are student loans broken?”, during which one Tory delegate said student finance had become a toxic issue which was driving young people from the Conservatives, the minister also agreed with Lewis that student loans should be renamed graduate contributions.

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While Johnson has referred to graduate contributions before, this is thought to be the first time he has explicitly supported the idea of renaming student loans.

He told the meeting: “It is clearly a time-limited graduate contribution, because it only lasts 30 years and it’s also an income-linked, time-limited graduate contribution.

“So I think we do need to work on the language and cease to use the terminology of debt and loans, and it has to be understood as a time-limited and income-linked graduate contribution that people are making.”

Lewis, who is the founder of MoneySavingExpert.com and campaigned against the freezing of the threshold, which effectively meant a retrospective hike in the cost of going to university, welcomed the government’s U-turn but said it had not repaired the damage done.

“It has knocked the faith of students in the student loans system we have … and it has knocked the faith of students in the entire political system. This has not fixed it.

“We have to make sure every student knows what the terms and conditions are when they start and we never make any retrospective changes.”

• This article was amended on 4 October 2017 because George Osborne’s final autumn statement was in 2015, not 2016 as an earlier version said.

