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Education reject Gorst’s plan for a UK-style student loan scheme

Education reject Gorst’s plan for a UK-style student loan scheme

Wednesday 11 May 2016

Education reject Gorst’s plan for a UK-style student loan scheme

Wednesday 11 May 2016

Almost 18 months after the Chief Minister called for a UK-style loan scheme for Jersey students the Education department have ruled the idea out, saying it could expose the States to a liability of up to £700 million.

A long-awaited report on Higher Education Funding has concluded that “under current circumstances there is no affordable way for Jersey to have a full student loan scheme similar to the UK’s”.

The average three-year course in the UK now costs in the region of £60,000 and for the first time, families in Jersey have been saying that the price of a university education is now out of reach for some households. The States already support university students to the tune of £7.8 million per year to support the 1,170 Jersey students in the UK.

Education say that a loan to cover both fees and living expenses – a move advocated by parent campaign groups - would create a liability of around £700 million, while a loan to cover just tuition fees would create a liability of around £345 million.

The report said: “The current financial pressures, unprecedented in the Island’s history, also mean that a full student loan would expose the Island to an unacceptable level of debt and financial risk.”

In January last year, Chief Minister Ian Gorst told an “Any Questions” event that the States had to do more to support families sending children to university.

He said at the time: “We are going to have to, I believe, bring in some sort of loan scheme that mirrors what we do in the UK. As I sit here, it seems to me that a mirroring of that UK system would be the most suitable solution."

The report, presented to the States by Education Minister Rod Bryans yesterday afternoon, said that more work would be done to consider a parents’ saving scheme, the redistribution of the current funds, the expansion of degree courses here in the Island and stronger links with European universities.

The report concluded: “In the short term the solution is to continue helping as many students as possible to go to university and to ensure the limited funds are distributed as equitably as possible.

“For those that find UK universities financially out of reach we must continue to develop alternatives.

“There is considerable scope to expand the education and training available in Jersey, particularly if there is increased support from the business sector and the new Education Business Partnership.

“The Education department will continue its ongoing negotiations with banks, universities and other jurisdictions as it has over the past two decades, to find innovative solutions as the higher education landscape evolves and the financial situation shifts.”

Families currently get support depending on their own income:

-       Households earning up to £26,750 qualify for all tuition fees to be paid above the first £1,500 and a full grant of £5,500.

-       Households earning up to £53,900 qualify for tuition fees to be paid, but no grant.

-       Households earning over £90,950 generally don’t qualify for States funding for tuition fees or grants.

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Posted by Joel M on
A back of the envelope calculations show the fund would require a capital endowment of £1,4bn to adequately fund a peak consumption of £70.2M annual loan draw-down (assumption 1,170 pupils @ £20k p.a = annual outlay of £23.4M yr 1 batch, £46.8m yr 2(yr1 + y2 cohort), £70.2M yr 3 (yr 1+ yr2 + yr 3 cohort)... assume the fund returns 5% p.a

To adequately fund a tuition only draw-down, an endowment of £630M would be required for a peak annual drawdown of £32M

Assuming the states numbers are based on 50% takeup, the numbers do seem accurate..

However one must be careful not to confuse an endowment fund with a liability, the Government could easily fund the same by designating a portion of the strategic reserve funds to invest in the future!
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