An Economic Analysis Of  Student ‘tax’

William Bateson

18th October 2019

 

It is too often stated that students are not attracted to universities due to acquired debts to pay for University fees, therefore having little incentive to study further education due to fears of debts that will hinder their professional careers.

 

However it is far from reality and has proven no less than a scare mongering concept. Students will only have to pay 9% of their earnings if they are earning above 21,000 pounds. This combined with a tax rate of 20% per annum will mean that you would only pay 29% instead for the next few years until the debt is paid off. The amount you have to repay only rises with the rise of your income over 21,000 this means that if you were to earn £31,000 pounds annually and your student debt is up to £50,000, you would only end up haveing to pay £900 annually as you pay 9% above the threshold. This over the course of 30 years isn't particularly much, especially if  the average student debt is £38,390. Significantly student debts are erased after a period of 30 years, regardless of the size of the loan, as well as students not being changed the 9% fee if they are earning below the £21,000 threshold.

Students ‘loans’ therefore act much more as an additional tax for high earners who due to higher education have the ability to work within workplaces which require skilled labour. If students had already been unable to go to university due to more competition and lack  places in universities due to the government paying for university fees then those high paying jobs would be unavailable.

 

The ability for students to pay for their own undergraduate courses allows for broader independence and allows for a greater capacity for learning compared to before as it allows students from poorer backgrounds to borrow wealth to repay later in exchange for an opportunity for higher education and a higher standard of living for both themselves and their future family. A total of 411,860 students had been placed in undergraduate courses in 2018 last year through UCAS, compared to Student numbers in 1992 which were less than half of the current figures, with tuition fees being introduced in 1994. Broader accessibility of higher education has led overall to a higher standard of living due to greater quality of human capital which allows for a rise in quaternary and tertiary industries which provide higher wages for workers than in less skilled labour professions.

 

However, it has shown still to be the case that not enough students from lower income backgrounds are receiving the opportunities they should have access to. Leading to still further inequalities within the field of education which in itself affects how much a person earns. This does not mean concepts such as positive-discrimination should come into play, which in turn are a means of socio-economic discrimination, but instead that of greater investmnet within lower income community education allowing a range of opportunity for everyone. If the intellectual divide is to be dismantled and a higher standard of living is truely desired, then the entire eduction system should perhaps be re-evaluated.