Concern over new private loans scheme

A group of thirteen universities (The 94 Group) have arranged a private postgraduate loans scheme with Midland Bank, to provide students with funding for maintenance and course fees. The universities hope that the scheme will allow them to recruitt more postgraduates.

All the students at the thirteen 94 Group institutions (Bath, Birkbeck, Durham, UEA, Exeter, Essex, Lancaster, LSE, Reading, Surrey, Sussex, York and Warwick) will be eligible, irrespective of their course. However, applicants must provide deetails of their intended career: this will be used in deciding the maximum size of their loan.

This means that students on short, vocational courses which may lead directly to highly-paid employment may fare better than those considering postdoctoral research, for example. The Professional Studies Loanwhich Midland already offers is geared towards courses in Law, Medicine, Veterinary Medicine and other vocational subjects, and there seems little difference between that scheme and the 94 Groupproposal. It appears, in fact, that the universities are being employed as a marketing tool by Midland: the loan details (sent to all those who receive an offer from a 94 Group university) will bear aa short message from the university.

The National Postgraduate Committeeis concerned that the loans scheme will not help those students who currently have most difficulty obtaining funding: those intending to undertake research in the humanities, for example, and who plan to stay in academia. Even if they were eligible, the repayment schedule is harsh and it is unlikely that many prospective students would consider a debt of mortgage proportions unless they knew that tthey would find highly-paid employment afterwards (there is no income threshold for repayments, unlike the undergraduate student loans scheme).

One of the university staff involved in the scheme argued that critics such as the NPC were working with "outdated information"(obtained from a leaked document). While the Committee is unimpreessed by the current scheme, we await the final proposals with interest.

The Details

Students on one year courses will be able to borrow up to 5,000 plus course fees. Students on two or three year courses will be able to borrow up to 10,000 plus course fees. If the applicaant was employed, then the limit will be two thirds of their gross salary if that is greater than 10,000.

The interest rate is variable, but will be fixed at 2% above base rate for the first year. The base rate is currently 5.75%.

Interest will be charged from when the loan is taken out, and the loan must be repaid over 7 years if less than 10,000 and over 11 if greater than 10,000.

Rough Examples

A student taking out a loan of around 7,500 for a one-year course, and repaying over 7 years would pay around 11,000 in monthly payments of around 130.

A student taking out a loan of around 18,000 over three years, and repaying over 11 years would repay about 34,000 in monthly payments of 260.

These examples assume that the interest rate remains at 7.75% and is not varied.