Loans for part-time students – what could possibly go wrong?

It should have been good news, but mistakes made by the government have resulted in an unfair student loan system for part-time undergraduates, says Claire Callender
Graduates leave the Great Hall after a degree ceremony at Birmingham University UK
The rules for when part-time students have to start repaying their loans are unfair, says Claire Callender. Photograph: Andrew Fox/Alamy

Part-time undergraduates, who make up a third of all undergraduates in England, are for the first time to be eligible for student loans to cover the costs of their tuition fees, just like their full-time peers. Come 2012‑13, an estimated one-third of part‑time students will qualify for non-means-tested loans. This gives part-time study the potential to expand, and to fulfil the government's objectives of reskilling and upskilling the workforce, while meeting the needs of students, especially those who work and have family commitments. This good news, however, has turned bad because the government has failed to get the terms and conditions right.

The idea of extending loans to part-time undergraduates is to level the playing field. Currently, the funding system favours full-time students and provision, and there are clear incentives for universities to grow their full-time provision and run down their part-time programmes. This has contributed to a decline in part-time undergraduate enrolments. The aim of the reforms is to help eradicate many of the disincentives for universities to provide part-time courses. But, if the student loans are not attractive, students may not take advantage.

The government has made two mistakes. First, only students studying above 25% and up to 75% of a full-time course can get loans to cover all their fees. Why the upper limit of 75%? What happens to the student who one year decides to accelerate their learning and studies, say, 90% of a full-time course? Surely they should be rewarded for this additional effort and their desire to speed up to completion? But, such a student would be penalised. In essence, the government is putting a ceiling on the amount of loan a part-time student can get. There is no similar limit for full-time students.

The second problem concerns when students start to repay their loans. Full-time students do not have to pay until they have graduated and are earning at least £21,000. For most full-time bachelor's students, this means that repayment does not kick in until at least 3.5 years after starting their course, and for those on longer courses (about 30%), such as medicine, until 5.5 years after. A different set of rules is being applied to part-time students. They are being asked to start repaying their loans 3.5 years after starting their course, or sooner if their course lasts less than three years.

This may look like a fair deal – however, the reality makes it anything but. Students who take short one-year undergraduate courses, often aimed at encouraging them to progress to a degree, would start repaying their loans once they completed that course, assuming their income was above £21,000. If they then decided to take a bachelor's degree, they would be repaying their loan for their previous course while still studying. In fact, all part-time students taking a bachelor's degree will have to start repaying their loans while studying because it will take them more than 3.5 years to complete their degree.

Ministers justify their approach because of the high interest rates that accrue on student loans while they study. From 2012-13, the day a student takes out a loan, they start clocking up interest rates of inflation plus 3%. Only once full-time students graduate – or, in the case of part-timers, 3.5 years after starting their course – are interest rates linked to income, and even then such a high level of interest is only paid by those earning more than £41,000. (Graduates earning between £21,000 and £41,000 will be charged interest on a sliding scale up to a maximum of inflation plus 3%.)

The government argues that its proposals for part-time students will reduce the amount of interest accrued on their loans. But this needs to be weighed against part-timers having to start repaying their loans while still studying.

A fairer solution would have been for part-timers to start repaying their loans 4.5 years after starting their course. This would have meant most part-timers taking a first degree would have repaid their loans once they had completed their degree.

These provisions make a mockery of the ideas informing the reforms of student funding – that higher education is free at the point of consumption and that tuition fees are covered in full by loans. Moreover, the planned changes add to the complexity, making it difficult to promote a clear and simple message about the advantages of student loans for part-time students. It would not have taken much to ensure that financial support for part-time students remained a good story instead of a bad one.

Claire Callender is professor of higher education at Birkbeck and the Institute of Education, University of London.