Treasury have "their heads in the sand" on student loans

Friday 13 January 2017

The Treasury are reluctant to set up a student loan scheme because of fears it will push up borrowing rates for a new hospital, according to the Chairman of the Public Accounts Committee.

Speaking at a Scrutiny hearing on higher education funding yesterday, Deputy Andrew Lewis said student loans seemed the only viable solution to the current finance “crisis” facing Island students, but that the borrowing for this could be complicated by the “bad timing” of the hospital deal.

The Treasury hopes to borrow up to £400million for the new hospital by issuing a 40-year bond - no rates have yet been confirmed but it's suggested the Island will end up paying back £820million in capital and interest over that period.

Now there are calls for the Treasury to help parents who are struggling to pay for their children to go to university.

In an interview with Express following the hearing, Deputy Lewis explained: “The timing of it is bad, they say, because if they were to have to borrow more money to create a bond on top of the hospital, it may make their bond rate for the hospital higher.”

“This is a genuine concern - I’m not saying that they’re wrong with that - but I think they need to have a conversation with the people that are providing the bond.”

A loan scheme, he argued, would therefore be a sensible suggestion, given that interest rates on a £100 million lend would provide “recyclable” revenue.

“Money won’t be coming back in every year from the hospital. Once you’ve built it and paid for it, that’s it. At the end of the forty years, you’ve still got to pay that 400 million pounds back – all we’re doing for the next forty years is paying interest.”

Pictured: Deputy Andrew Lewis, Chairman of the Public Accounts Committee.

At present, students can receive a loan of £1,500 from NatWest or a means-tested grant based on parental income from the States - a system that was denounced by the Jersey Student Loan Support Group (JSLSG) at a second hearing as "discriminatory." However, even at their upper limits, neither can fully cover both university tuition and living costs.

The JSLSG, who have conducted surveys of affected parents and students, therefore backed Deputy Lewis' calls for a loans scheme, stating that parents would not be opposed to acting as guarantors for user paid loans. Such loans would be better than present alternative, they argued, which has had "disturbing" consequences for middle-income families. In some cases, they said that parents had resorted to dipping into pension funds, working past their retirement age, and/or remortgaging or downsizing their homes to fund their children's degrees.

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— JsySLSGroup (@JsySLSgroup) October 6, 2016

Leaving parents to shoulder the burden, JSLSG's Nicola Heath argued, would only lead to a new burden on the States itself, as parents, "...require more support in old age."

They also warned against the wider implications of a "graduate-hungry" Island, echoing Deputy Lewis' earlier comment that a lack of a "highly educated workforce" could lead to "a faltering economy."

Held in the States building, the hearings were conducted by Education Scrutiny Panel members Deputy Tracey Vallois, Deputy Sam Mézec and Deputy Jeremy Maçon, who all have different experiences of the Higher Education system, having been unable to afford a degree, studied in the UK and studied in Jersey respectively. Bahram Bekhradnia, a UK Higher Education advisor, was also in attendance.

Despite the Public Accounts Chairman's concern that the Treasury has “their heads in the sand”, Deputy Jeremy Maçon was hopeful that a solution could be found following the future publication of the Scrutiny report.

He told Express: “What’s clearly come across today is how much the current system is failing a lot of middle income families, the stress and strain that it’s putting on families and individual students, and also the wider cost to Jersey society… that [it] will suffer long-term.”

“I’m hoping that through the evidence produced by the Scrutiny panel again will give States members enough ammunition to change the Council of Ministers’ position, [and] to change the public’s opinion towards the issue of higher education, so that hopefully we can all come together and provide a proper solution for our students in Jersey.”