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Financial Aid for College in the UK?


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I am studying different models of financial aid to help reform our higher education system in the US. My focus is at the college/university level. I was told the UK system was mainly loan based, is there anyone that can elaborate on the effectiveness of their system and elaborate on how it works?

 

So far, I've found this site:

 

http://www.dfes.gov.uk/studentsupport/students/pla_.shtml

 

But it seems like grants are available only up to 1,000 GBP and a maximum of 75% in loans, unless a family is really poor then they may be elibile for the remaining 25%.

 

Also, how effective is the UK system? Does it leave a lot of students behind? Does it create an reasonable and affordable system for students to pay for college?

 

Thank you.

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Man.... Its a perfect system.. why do you want to change it :@

Based on the premise that SFA is at risk of being severely cut or even eliminated from the California Budget, we are proposing reasonable and prudent changes.

 

a) Safeguard Financial Assistance

i) To safeguard financial assistance, all grants should be turned into low interest loans with interest at 90% of the prime rate.

a. Students would not be required to pay back the loans until they start making over $30,000 and a student that leaves the state of California within 5 years of graduation would forfeit the interest savings and pay interest at the full rate without discount from the date of the original loan. Regardless of their income, however, after 7 years upon receiving the loan they will be expected to begin paying in installments based on a sliding scale.

ii) This will help ensure that there will be money for students with financial assistance to pay for college.

iii) This will help keep money available and circulating among the students that need financial assistance even during a budget crisis.

iv) As loans, the money will come back to the state to give out to a new generation of students in need, thus ensuring there will be always available money.

 

b.) Increase Student Diversity

i) In addition, this will help increase student diversity since financial aid is limited to just the poor, and isn?t available to middle class families. If the state continues to contribute money to financial aid, then more and more students will be able to attend until all need for financial aid is fulfilled.

c) Improves Flexibility of State Budget

ii) Once a large enough pool of money is available to students, the state will only need to contribute the interest differential for the outstanding aggregate loan balance to maintain the program in the future.

iii) This gives the state flexibility to contribute during economically prosperous times, and wouldn?t require the state to contribute during a budget crisis.

iv) Estimated Total Savings to the state and the students after one cycle of the low interest loans program can equal up to $1.5 billion1 in savings.

 

d) Lowers Tuition by 33%

i) Student tuition will drop. Currently 33% of all our fees go towards financial aid. This means that once the program is in affect for one generation, our tuition fees would be reduced by 33% thus making college even more affordable to students.

ii) This increases the accessibility of college for families because it makes the UC?s 33% cheaper or near their original rates before California?s Budget Crisis.

iii) Increases the quality of education, by allowing the state and the UC?s to allocate more money into the classrooms and research facilities. Also with lower tuition, there will be a greater number of applicants, thus increasing the competition and the quality of students.

 

e) Limits Financial Aid Abuse

i) A majority of students use financial aid for unrelated school activities. The current estimates create a ceiling for the necessary amount of financial aid.

a. It isn?t logical to lower the ceiling, because in rare situations some students may need the full amount. A system with proper safeguards against abuse and where the students can have the money available to them is best.

b. However, a majority of students that receive grants exploit the financial aid for personal use. The current system gives an estimated average of $19,720 per student for educational expenses for the 2004-2005 year2. A personal realistic model shows that this approximately $6,000 more than the average need of a student. View Appendix A for details.

1. The current model already gives over $1,500 yearly per student for personal use for clothing, entertainment, and miscellaneous purchases.

2. In addition, it does not take into account, that most college students share housing expenses with other roommates, work during the summer months, and that college students borrow and buy used books from friends or from discount bookstores on the Internet.

c. With grants students accept all of the money provided by the state and federal government.

1. In an ideal system, the excess financial aid should return back to the system to help increase the accessibility of college for other students; however this tax-funded aid is abused.

d. No interest loans are also abused by students. Students take these loans out for personal use, for their families, paying their credit cards, investing in stocks, etc.

e. There is abuse of the present system by students whose parents receive unreported cash income, have hidden assets, or previously signed away assets, or in other words non-qualifying students are cheating the system because of false representation on financial aid applications. These cheating students would be less receptive to taking low interest loans.

f) Limit Abuse by Low Interest Loans

i) Low interest loans will provide the money necessary needed for students to attend college.

a. The current model and estimates can still be used as guidelines, but allows students to borrow money as needed to the current ceiling.

1. Currently, the acceptance process of financial aid is self-regulatory based on the honor system.

2. A solution to the problem is large administrative overhead to regulate the amount each student should receive, but this is inefficient and tedious.

3. Allow the system to still be self-regulatory by using low interest loans. Students will be less likely to abuse financial aid when they need to take out low interest loans.

 

A system of pure low interest loans will be the most beneficial to students and the state because it will provide the greatest tuition reductions, limits financial aid abuse the most, and will relieve the state?s budget crisis the most. However, a compromise of the current system is a hybrid system of low interest loans and grants. There are three possible hybrid systems.

 

1) Tiered system: The lowest tiers of low-income families are given grants, while all other families are given low interest loans.

2) 50/50 system: All students will be given financial aid as 50% grants and 50% as low interest loans. The percentages are flexible, and a higher percentage of low interest loans are the most beneficial to all prospective college students. Out of the three hybrid systems, this is the fairest and most non-biased system.

4) Combined system: The lowest income families will be given grants, but as a family?s income increases financial aid is more low interest loan based.

 

As the state makes general cuts to the UC system and Financial Aid, there is no way for tuition increases to continually match the need of financial aid, hence the current idea of decoupling. Tuition will rise to unaffordable rates, and the UC system will no longer be attractive. If tuition is high and decoupling occurs then this causes fiscal strain on families in need. In addition, our degrees are only worth as much as the reputation the UC system provides. If less qualified people enter due to financial difficulties then our degrees will be worth less. A rippling effect of under qualified graduates coming out of the UC?s will harm California?s businesses and California?s economy, thus forcing companies to look else where for better candidates. In order to avoid these issues in the future, a self-sustaining low interest loan program will provide the money necessary for students to attend college. As the state recovers and puts more money into the all loans program, more and more students will be able to benefit from the system to the point when even all middle class families can be fully financially assisted to attend school.

 

Estimated Total Savings to the state and the students after one cycle of the low interest loans program can equal up to $1.5 billion1 in savings.

 

A system of financial aid by low interest loans helps ensure that there will be money for students to pay for college, helps fund financial assistance even during a budget crisis, limits financial aid abuse, lowers tuition and increases the accessibility, affordability, and quality of education.

 

References:

1 California Department of Finance ? 2004-2005 Higher Education Budget

2 UCI Office of Financial Aid and Scholarships ? 2004-2005 Costs to Attend UCI Estimates

Appendix A ? Independent Survey of Financial Need at UCI

Legislative Analyst's Office - Analysis of the 2003-04 University of California Budget Bill

DfES - UK's Financial support for higher education students in 2004/05

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