Education Bill

My Lords, I would like to respond to the amendments of the noble Lord, Lord Stevenson, and of my noble friends Lady Brinton and Lady Sharp, in turn. I know that many noble Lords, like me, welcome the extension of loans to eligible part-time students studying at publicly funded institutions to cover the full cost of their tuition. Upfront tuition costs were identified by Lord Browne in his independent review of higher education as the primary barrier to students who want to study on a part-time basis and we have removed that barrier. I thank the noble Lord, Lord Stevenson for introducing his amendment, which raised a debate in this Room about the extension of loans to part-time students. The introduction of caps on tuition charges for part-time courses is an important part of our higher education reform. It will enable the Government to provide, for the first time, loans to eligible part-time students to cover the full cost of their tuition at publicly funded institutions, just as it does for full-time students. The Government agree with the overarching principle of Lord Browne’s independent review that those who benefit most from higher education should make a larger contribution to its costs. This holds true for those who choose to study part-time as much as those who pursue it full-time. The Government’s reforms mean that while the teaching grant for the Higher Education Funding Council for England is being reduced or stopped completely for some subjects, universities will have access to a steady income stream from subsidised tuition loans and will get the future of sustainable funding that they need. We would be reluctant to limit to £1,000 per year the amount that institutions can charge for part-time courses. Such a limit would pose a serious risk to the financial sustainability of the part-time sector, as it would restrict a now primary source of funding. This would place part-time students at a significant disadvantage to their full-time counterparts and I am sure that the noble Lord is not advocating that. Amendment 148 seeks to ensure that the amount of interest that could be charged on loans for part-time students should not be higher than the rate charged for full-time students. My noble friends raise an important point and one with which I agree wholeheartedly. Part-time students should be treated in exactly the same way as full-time students in the way in which interest is applied to their loans. We have never intended that full-time and part-time students should be treated differently in this respect. I hope that the indicative regulation published when this clause was in the Commons will also reassure my noble friends on this point. The regulation showed that student loans will bear interest at RPI plus 3 per cent until the individual becomes liable to repay. From this point, we will introduce a progressive system whereby low earners—again, regardless of whether they studied full-time or part-time—will be protected and accrue interest only at the rate of inflation. Those with an income of £21,000 or less—below the repayment threshold—will not need to make any repayments and will accrue interest at RPI only, which will maintain the value of the loan in real terms. For anyone with income greater than this, the rate of interest applied will increase gradually with their income, reaching a maximum of RPI plus 3 per cent at an income of £41,000. Those with incomes of £41,000 or more will accrue interest at a rate of RPI plus 3 per cent. I hope that that has reassured my noble friends on those points. As it is our intention to apply our proposals to both full-time and part-time students and the individual’s mode of study has no impact on how the rate is calculated, it is therefore unnecessary to set this out in primary legislation. Moving to the second point in this amendment, I understand the concern about the date that part-time students become liable to repay, though it is important to remember that whether they will actually have to begin to repay will depend on their income. Under our current proposals, part-time students become due to repay on 6 April following the third anniversary of the start date of their course, even if they continue to study. We have chosen this date as an equivalent to the time when a full-time borrower studying a three-year degree course would reach their repayment date. However, it is important to remember that no one will have to repay if their income is below £21,000. The added benefit for those part-time students who have incomes less than £41,000 is that they will at this point see a reduction in the interest that they are charged. Once part-time students become liable to repay, their interest will be dependent on their income, whereas students who have not yet reached their statutory repayment due date will be charged interest at RPI plus three per cent. I know that some higher education institutions feel that delaying the repayment point by a further year would benefit their students, particularly those studying the equivalent of a three-year course part time over four years. I can see that this might be the case at least for those part-time students earning more than £21,000. However, the converse would be true for many other part-time students, particularly those earning under £21,000. They would be charged a higher interest rate for a further year but would not be required to repay during that year. However, I have listened to the argument very closely and I think that it would be prudent of me to go back to my right honourable friend David Willetts and raise these points with him again and commit to writing to noble Lords about these concerns. This is a very valid point and one that we need to consider very seriously.