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Abolition of the Graduate Endowment Fee

DescriptionConsultation paper on the principle of abolishing the Graduate Endowment Fee for those students graduating from Scottish Higher Education from 1 April 2007 onwards.
ISBN
Official Print Publication Date
Website Publication DateJuly 13, 2007

CONSULTATION DOCUMENT

ABOLITION OF THE GRADUATE ENDOWMENT FEE

This document is also available in PDF format (80KB)

Introduction

1. This consultation paper invites comments on the principle of abolishing the Graduate Endowment (GE) Fee for students who graduate in 2007 and thereafter.

Background

2. The GE fee was part of the new student support arrangements for higher education students introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 2001 and applied from autumn that year. Graduates are not asked to pay the GE fee until 1 April after they have completed their course, although the amount payable is set at the beginning of their degree course. For entrants in academic year 2006-07, the endowment fee would be £2,289 at the time of graduation.

3. Not all students are liable to pay the GE fee. There are a number of exemptions, including lone parents, those who are in receipt of the Disabled Students' Allowance at some point during their course, those who are studying at a UK institution outside Scotland, students who come to study in Scotland from elsewhere in the UK or from non-EU countries overseas, or those who study part-time. Overall, almost 50% of graduates are exempt under these criteria.

4. The next cohort of students who will, under current arrangements, become obliged to pay the GE fee are those who have successfully completed their course on or after 1 April 2007. The regulations made under the 2001 Act will result in those graduates becoming liable to pay on 1 April 2008. Students who successfully complete their course on or after 1 April next year, become liable to pay the fee on 1 April 2009.

Rationale

5. The GE fee was introduced as part of a new system of student support designed to promote social inclusion and enhance civic society, removing barriers to widening access and participation. However the GE fee has failed to deliver those aims in a modern Scotland. Indeed it is important that education in Scotland is made as accessible as possible and that students are not presented with a financial bill from government for their participation in higher education.

6. The GE fee has burdened many graduates and their families with additional debt and has acted as a disincentive to accessing higher education. The average amount of debt is now around £13,000 per student and, since the introduction of the GE, the age participation index shows that the proportion of young Scots in higher education has fallen (from 51.1% in 2001-02 to 47.1% in 2005-06).

7. Abolition of the GE fee will help relieve some of the financial pressures facing graduates as they start their working lives. It is a step towards ensuring that in a modern Scotland everyone can gain economic, social and personal fulfilment to the fullest possible extent, and that everyone who has the ability has the opportunity to be involved in the higher education experience, by removing the barriers which may prevent them from doing so.

8. Evidence that debt worries are a disincentive to study is strong. In 2003, The Joseph Rowntree Foundation found that young people from disadvantaged backgrounds are often deterred from both entering full-time education and from continuing in it long enough to reach their full academic potential because of economic hardships they suffer, particularly as a result of debt.

9. The abolition of the GE fee should therefore be a contributing factor in opening up access to higher education on a more equitable basis. Young people from areas of multiple deprivation should have wider access to higher education and although efforts on this have increased recently, the proportion of entrants from deprived areas of Scotland has not changed significantly over the past five years.

10. The GE fee has not raised the levels of income initially predicted - in the three years it has been in operation two thirds of those eligible to pay the fee have not paid it back directly, but added it to their student loan. It is also worth noting that the average time taken to repay an income contingent loan is approximately thirteen years. The costs associated with this mean that the taxpayer loses around one third of all income collected. For graduates whose liability arose in 2005, 2006 or 2007 only around £13m has been paid back in cash, with around £27m added to loans. Figures from SLC as at 1 April 2007 show that over these three years, only £47,000 of this loan debt has been returned to the taxpayer.

Legislative process

11. The GE fee was introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 2001 and primary legislation is required to repeal the relevant parts of the Act. Subject to the will of Parliament, we hope that this legislation will come into force on 1st April 2008 to remove the obligation to pay from those who successfully completed their course on or after 1 April 2007. To achieve this, we would therefore anticipate introducing a bill to Parliament in autumn 2007.

12. The legislation would cover:

· students who graduate this summer

· students currently in higher education

· students about to enter higher education this autumn

· all subsequent students

13. There are no plans to abolish the GE fee in respect of those who became liable to pay it in 2005, 2006 and 2007 -.they will still be bound by their current legal obligations to pay. Those who have chosen to add the fee to their student loan account will repay in line with the current student loan repayment arrangements i.e. repayment will commence when they reach the income threshold of £15,000. SAAS will also continue to pursue payment from liable graduates in those historic cohorts who have not repaid as yet.

Financial implications

14. The GE fee is a one-off payment intended to help provide student support for future generations. From 2008-09, the Executive will forego £15m per annum in income from the endowment fee. This income is currently directly attributable to the Executive and is applied (within the legislative restrictions) to release existing budget to be used elsewhere to meet in-year-pressures. It is this additional flexibility to fund in-year non-baseline pressures that will be lost immediately. This will not affect the fees, grants and bursaries currently payable by SAAS. The Young Students Bursary will continue to be funded. Furthermore, there will be no implications for university funding, which will continue to come from existing budgets.

Conclusion

15. We are inviting written responses by 7 September 2007 indicating whether you agree with the principle of abolishing the Graduate Endowment fee.

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