Abstract
Recent changes in higher education financing policies in England have led to more students funding their studies via two types of student loan—for tuition fees and/or for maintenance. Moreover, the average amount borrowed has been increasing. Yet not all students take out loans, and understanding the determinants of take-up is important, not least because those who can manage to study without borrowing enjoy significant advantages both during and after their studies. Using Next Steps, a unique dataset with data on both types of loan and rich information on students’ backgrounds and their attitudes to debt, we analyse loan take-up by type of loan. We estimate the strength of the association of loan take-up with each of students’ family income, indicators of family wealth (home ownership, private education, not living in a deprived area, social class), parental education, gender, ethnicity and debt aversion. Of these, only social class is found to have no independent effect. We find that these associations can differ according to the type of debt. We also find that, while students from some disadvantaged groups are less likely to take out maintenance loans, this association is accounted for by students living at home while studying, a prime mechanism for debt avoidance.
Highlights
For the past 20 years, successive reforms in higher education financing in England have led to more undergraduate students drawing on student loans to pay for their tuition fees and living costs, and borrowing larger sums
Understanding who does and does not take out student loans is important, because those who manage to study without borrowing enjoy significant advantages both during and after their studies
These advantages span the financial realm, and spill over to academic achievements and societal milestones: having student loans is linked to lower probabilities of graduating, having a family, buying a house and saving for retirement
Summary
For the past 20 years, successive reforms in higher education financing in England have led to more undergraduate students drawing on student loans to pay for their tuition fees and living costs, and borrowing larger sums. Little research in England explores who borrows, what they borrow for, and the role of debt aversion. Existing research has relied exclusively on one limited dataset, providing a partial picture of undergraduate borrowing. Higher Education (2019) 78:965–983 significant gaps in our knowledge by calling on a unique longitudinal dataset— Steps— allowing us to investigate the determinants of student loan take-up, differentiating between maintenance and tuition fee loans, while exploring the influence of debt aversion. Steps includes students studying in 2009 and 2010. Average tuition and maintenance loan debt has risen exponentially. Our conclusions give insights into the inequalities created by the student funding system
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