Replace student loans with grants, SNP says

With new Scottish graduates due to start paying contributions towards the cost of their degrees next month, the Scottish National party today called for all student loans to be replaced by maintenance grants.

Scotland refused to follow England's lead in 1997 in charging tuition fees but introduced a graduate endowment charge, of ?2,000, to be paid in either a lump sum or instalments after students completed their degrees and were earning ?15,000 or more a year. England has since also abolished upfront fees but made students liable for much higher tuition costs, of up to ?3,000 a year.

While universities in Scotland have broadly supported the Scottish executive's policy, they have expressed concerns that the extra funding boost from fees to English universities could leave them behind.

Today Fiona Hyslop, shadow Scottish education minister, said an estimated 34% of those people who graduated in 1997 were still not repaying their loans because their incomes had not reached the required level.

She said: "Labour has let down Scotland's education system and our students. It is incredible that more than one in three of those who graduated the year Labour came to power still cannot afford to even start paying back their student loans.

"Coupled with the increase in bankruptcies among graduates, it is clear that the student loans system has been a disaster for Scotland."

The system was a costly drag on the economy, she said. "Graduates from our universities are among the brightest and best, contributing enormously to the economic and social lifeblood of the country. We should be encouraging people to go to university, not putting them off.

"That is why the SNP would introduce a Student Maintenance Grant. People should have access to a university education based on merit rather than ability to pay. On April 1 the government will be adding to this mounting debt problem with a further ?2,000 graduate charge. That is unacceptable," Ms Hyslop said.

The SNP said a Barclays Bank survey estimated the average debt of graduates at ?12,000 and predicted this would rise to ?34,000 by the end of the decade. The average debt was ?2,000 in 1994.

A spokeswoman for the Scottish Executive said: "We expect approximately 1,000 students to pay the graduate endowment in April 2005. The majority of students who started degree courses in 2001-02 continued into fourth year in autumn 2004 and will not become liable to pay until April 2006."

The Graduate Endowment is a one-off payment to be made by first-time graduates who started full-time higher education courses from 2001-02 onwards. A large proportion of the student population will be exempt. Income from the endowment will be used solely for the purposes of student support.

Students from England and Wales pay fees of ?1,200 a year to Scottish universities while Scottish domiciled and European Union students are liable for the ?2,000 payment. Graduates can pay the graduate endowment in full, add the amount to their student loan account or choose a combination of paying part by cheque and applying for a student loan for the rest.

About half the student body are exempt, including those doing sub-degree HNC or HND courses, mature students, lone parents and disabled students.