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Student tuition fees and loans: Don't make an expensive mistake

Despite all the protests, the nursing student bursary in England is history. Alison Moore looks at what the switch to tuition fees and loans will mean for students and how never paying off the debt may be the most sensible thing you can do.
fees

Despite all the protests, the nursing student bursary in England is history. Alison Moore looks at what the switch to tuition fees and loans will mean for students and how never paying off the debt may be the most sensible thing you can do

What will student tuition fees mean for nurses?

From August, new nursing and midwifery students and those entering most allied healthcare professions no longer receive NHS bursaries and will have to pay tuition fees for their courses at English universities.

They will have access to the student loans system available to other students. With yearly tuition costs of up to 9,250, plus means-tested maintenance loans, many nurses will start their

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Despite all the protests, the nursing student bursary in England is history. Alison Moore looks at what the switch to tuition fees and loans will mean for students and how never paying off the debt may be the most sensible thing you can do

fees
The loan system that replaced the NHS bursary offers more financial help but will leave
graduates paying off debt for up to 30 years. Picture: iStock

What will student tuition fees mean for nurses?

From August, new nursing and midwifery students – and those entering most allied healthcare professions – no longer receive NHS bursaries and will have to pay tuition fees for their courses at English universities.

They will have access to the student loans system available to other students. With yearly tuition costs of up to £9,250, plus means-tested maintenance loans, many nurses will start their careers with debts of £40,000 or more.

How much will I have to pay back?

Everyone with a student loan has to pay back 9% of what they earn over £21,000 until the debt is paid off or 30 years have passed since they became liable to repay. This means a nurse earning £30,000 a year will pay £67 a month (£810 a year). If they then go part-time and their income falls below £21,000 they won’t have to pay anything.

Payments start from the April after you complete the course and would usually be deducted from your pay packet.

What about interest rates?

This is the sting in the tail. The interest rate charged while you are studying and until the following April is the retail price index (RPI) plus 3% – which is why current interest rates are above 6%. Once you start repaying, interest is charged at RPI if you are earning below £21,000 and then increases on a sliding scale to RPI plus 3% at an income of £41,000.

Sounds like the interest could really build up?

It could, and many graduates on middle incomes will be paying back too little each month to keep up with the interest that is added to their debt. This sounds frightening, because the debt will keep on rising even though you are making repayments.

A study published in July by policy and economics consultancy London Economics looked at how the loans system would affect graduates in different careers and concluded that those with mid-range earnings will suffer most. That is likely to include most nurses.

I don’t want to end up with debt of £50,000 or £60,000 – perhaps I should try to pay off part of it after a few years with a lump sum?

This could be a very expensive mistake. Paying off part of a large debt early will reduce the amount owing but won’t reduce your monthly repayments. That is because what you are asked to pay each year, 9% of your income over £21,000, does not change until the whole of the debt is repaid.

Reducing your debt may mean you repay it all earlier – but many nurses will get to the end of the repayment period with far more than £10,000 still owed, and this will be written off. Partial repayment could be the worst of both worlds – you will still be making the same repayments and don’t have the lump sum to spend on something else.

Sounds like I will never pay off the debt?

Chances are most nurses won’t – but they are not alone in this. The majority of graduates are likely to have some of their debt remaining after 30 years and will have this written off. The exceptions are the higher earners who will start paying back capital fairly quickly – but few nurses are likely to be in this position.

Nurses who start off with smaller debts – for example, because they paid tuition fees in advance or did not take out a maintenance loan – might manage to pay off the loans, although future interest rates will be important in this. Anne Corrin, the RCN’s head of professional learning and development, describes the system as ‘halfway between a loan and a graduate tax,’ adding: ‘My sense is that a lot of students are really unclear about how this works.’

Does it matter that there is this huge debt hanging over me?

Arguably, the size of the debt is largely irrelevant, but what could affect you more is the extra drain on the money you have left to spend each month after the repayments. The London Economics study, commissioned by the University and College Union, suggested this could mean the average male nurse effectively paying an additional 3.6% of their income towards this for 30 years after graduation but still not paying it all back.

For women in nursing, who tend to have lower earnings and may take a career break, the amount outstanding would be even larger. This extra ‘tax’ could affect not just how much money you have to spend each month but also how much banks would lend you for a mortgage, for example. The study argued that the effect this would have on people in middle age was ‘a largely unforeseen consequence of the 2012 reforms’.

Could this all change?

Yes, it could. First of all, some of the terms of the agreement you sign before taking out the tuition fee or maintenance loan could change retrospectively. The £21,000 threshold for starting payments, for example, was meant to rise with average earnings this year but has been frozen until 2021 – meaning more lower-paid graduates have to pay something back.

More broadly, a system where few people pay back the amount borrowed seems unstable – and the percentage of those who are likely to pay back the full amount has been shrinking rapidly. We don’t know what effect having people in their 30s and 40s paying back these loans will have – will it affect the housing market for example? Could it put people off having children because they have less spare money? Will the repayments make it less attractive for people to return to work after a career break?

It’s possible a change of government could see the system re-examined – although writing off all existing fees would be expensive. Ms Corrin says: ‘The last election made it quite clear that young people were not happy with the system.’

My child is going into nursing this year – what is the best way I can help them through their student years?

If you can afford it, you may be tempted to reduce the amount that they have to borrow by a few thousand pounds. However, this might not reduce the amount they have to pay back each year or mean they repay the debt any earlier. That will depend on how far and how quickly they progress in their career, and what level interest rates are at in the future.

Remember, even if they get the maximum maintenance loan it is unlikely to cover all of their living costs. So some of your money will be needed to top up maintenance loans.

Is there any good news for nursing in all of this?

The government has said the cap on the number of nursing students will be abolished, so up to 10,000 new training places could be created by 2020. However, with falling numbers of applicants for courses in September, universities may be nervous about creating more places.

The old bursary system was also far from perfect: Ms Corrin says the limited financial help made it very difficult for nursing students to manage, and lack of money was a common reason for them to drop out. The new system offers more financial help during the student years, which might encourage nurses to complete their courses.

Guidance and the impact on your pocket

You can calculate how much you have to pay back and how long it will take on this page

The official guidance on student loans is here

Different rules apply for students from Wales, Scotland and Northern Ireland, and fee levels may be different for English students studying outside England.

Here is a link to the London Economics study: The impact of student loan repayments on graduate taxes


Alison Moore is a freelance journalist

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