The Higher Education Act 2004 outlined that a university could charge fees of up to £3,000 per annum, variable from course to course, and varied with inflation by the government. Currently, this stands at £3,290 for 2010/11 academic year. This means that students now take out two loans: one for fees and another for maintenance (accommodation, food etc). This amount can range from about £3,500 to £6,000 per year. Researchers asked 2,000 students from 139 university campuses in England how much debt they had amassed (including credit card, bank debts and tuition fees) and the average was £5,293.
The amount owed is repayable based on income; a graduate pays 9% of their gross income over a £15,000 threshold. The interest is linked to the retail price index (RPI), and any loans outstanding after 25 years can be written off.
Having gone though this system, I remember how many friends really struggled to pay for food and other basics after paying for accommodation and fees. Many started part-time work, and this was fine when jobs were available. However, over the past two years, the number of students getting into financial difficulty has increased, with many wishing to work but with no jobs available. The amount of summer jobs available has reduced and consequently, part-time work for students has become much more competitive
Now we have a new coalition government with new ideas. Unfortunately, it is also a cash-strapped government looking for new ways to fund the debts it finds itself in. Vince Cable, the Business Secretary, is considering replacing the Income-Contingent Repayment (ICR) as described above with a new Graduate Tax Scheme.
In principle, the idea behind the Graduate Tax Scheme is that those who earn more pay more for university. In a speech to universities, Vince Cable said: “It surely can’t be right that a teacher or care worker or research scientist is expected to pay the same graduate contribution as a top commercial lawyer or surgeon or City analyst whose graduate premium is so much bigger”.
When I think about it, that is exactly what we do in the real world. The more we earn, the more tax we pay. I believe that slowly we will start to see more students go abroad for higher education; the danger that follows is that they will not return. We will slowly see a shortage of skilled labour that will only push the cost up for these professions: a simple case of supply and demand.
However invaluable education is, the fact remains: if it’s not affordable at the outset then we will lose those with so much potential but who are worried about how they can cope with debt. For those who do take the journey, isn't the government just putting more pressure on those who have so much pressure on them already?
So, what would a Graduate Tax Scheme mean for the next generation of accountants?
I believe that many more students will look to go straight into accountancy immediately after leaving school. The three main accountancy bodies (ACA, ACCA and CIMA) provide options for school leavers. The advantage is clear, you can earn at the same time as studying and if you get lucky, you could even be sponsored by a company.
The reason that more students don’t do that now is because university is a life experience. Additionally, if you have an accountancy-relevant degree, you get many exceptions from the above accountancy bodies therefore reducing time to pass exams.
However, if the cost of going to university goes up two-fold, would you bother? In my opinion, the majority will still go through university but over time the percentage of those who give university a miss will increase.
It would be a shame if student miss out on university life due to costs. Let’s hope the findings of a review by Lord Browne of Madingley, BP’s former chairman, result in an outcome that allows students to experience university life without accruing crippling debts.
Mehul Patel graduated in Actuarial Science from University of Kent before qualifying as a Management Accountant. As the Financial Controller of Trinity Mirror Digital Recruitment Ltd, part of Trinity Mirror plc, Mehul has the responsibly of budgets, forecasting and helping the business and the board find ways to continue expanding.


