So what’s the problem? Well, some academics have declared the discounts to be unfair, stressing that the benefit will only be enjoyed by well off families – those who presumably have thousands of pounds lying ready in bank accounts for the direct debit instalments the universities are asking for, in order to qualify them for the discount. Of course most students, whose families more than likely lack this luxury, will be taking full advantage of the support offered by Local Education Authorities (LEAs) and the Student Loans Company in order to pay the fees of up to £9,000 per year.
According to Sally Hunt, the general secretary of the University and Colleges Union, “These discounts are likely to mean students leaning once again on the bank of mum and dad, and will inevitably benefit those with the deepest pockets. What a mess the Government has created for both students and universities.”
Those who choose to pay their fees upfront could make a saving of over £1000 on the total cost of their degree. A number of UK universities have introduced the scheme, which offers discounts of up to 5% for students who pay at the start of term. These universities include Portsmouth, Gloucestershire, Swansea and Southampton Solent. The discounts are still quite stingy though, for example Gloucestershire are offering a £200 discount on yearly fees of £8,250 which amounts to a saving of just £600 over three years. Southampton Solent, which charges £7,800 a little more generous – based on a 5% discount that’s a total saving of £1,170 over a three year degree.
Yeah, the discounts will benefit universities by giving them the money up front but would it benefit students? Not really, says a task force on student finance, chaired by Money Saving Expert Martin Lewis. Under the new system, student loan repayments only kick in after earning £21,000 or more. So, if you graduate and end up going into a low paying job there are no benefits whatsoever. According to Lewis, “Unless they are guaranteed a lifetime of high pay, it makes financial sense to put the cash in a high paying ISA or savings account during studies and take the loan out. Afterwards if it looks like the loan will have to be repaid, clear the debt then. Or, alternatively, it may simply be better used towards lowering a mortgage or car loan, which are worse and costlier forms of debt”, the task force said.
And the universities are not the only ones trying to encourage pre-payment – the government recently did a u-turn on plans to penalise those wishing to repay student loans early. Something must be done to make the present system fairer, as all evidence points to it benefiting those who afford the luxury of being well off.