Category: student finance

  • Second-generation student borrowers | SRHE Blog

    Second-generation student borrowers | SRHE Blog

    by Ariane de Gayardon

    Since the 1980s, massification, policy shifts, and changing ideas about who benefits from higher education have led to the expansion of national student loan schemes globally. For instance, student loans were introduced in England in 1990 and generalized in 1998. Australia introduced income-contingent student loans in the late 1980s. While federal student loans were introduced in the US in 1958, their number and the amount of individual student loan debt ramped up in the 1990s.

    A lot of academic research has analysed this trend, evaluating the effect of student loans on access, retention, success, the student experience, and even graduate outcomes. Yet, this research is based on the choices and experiences of first-generation student borrowers and might not apply to current and future students.

    First-generation borrowers enter higher education with parents who have either not been to higher education, or who have a tertiary degree that pre-dates the expansion of student loans. The parents of first-generation borrowers therefore did not take up loans to pay for their higher education and had no associated repayment burden in adulthood. Any cost associated with these parents’ studies will likely have been shouldered by their families or through grants.

    Second-generation borrowers are the offspring of first-generation borrowers. Their parents took out student loans to pay for their own higher education. The choices made by second-generation borrowers when it comes to higher education and its funding could significantly differ from first-generation borrowers, because they are impacted by their parents’ own experience with student loans.

    Parents and parental experience indeed play an important role in children’s higher education choices and financial decisions. On the one hand, parents can provide financial or in-kind support for higher education. This is most evident in the design of student funding policies which often integrate parental income and financial contributions. In many countries, eligibility for financial aid is means-tested and based on family income (Williams & Usher, 2022). Examples include the US where an Expected Family Contribution is calculated upon assessment of financial need, or Germany where the financial aid system is based on a legal obligation for parents to contribute to their children’s study costs. Indeed, evidence shows that parents do contribute to students’ income. In Europe, family contributions make up nearly half of students’ income (Hauschildt et al, 2018). But the role of parents also extends to decisions about student loans: parents tend to try and shield their children from student debt, helping them financially when possible or encouraging cost-saving behaviour (West et al, 2015).

    On the other hand, parents transmit financial values to their children, which might play a role in their higher education decisions. Family financial socialization theory states that children learn their financial attitudes and behaviour from their parents, through direct teaching and via family interactions and relationships (Gudmunson & Danes, 2011). Studies indeed show the intergenerational transmission of social norms and economic preferences (Maccoby, 1992), including attitudes towards general debt (Almenberg et al, 2021). Continuity of financial values over generations has been observed in the specific case of higher education. Parents who received parental financial support for their own studies are more likely to contribute toward their children’s studies (Steelman & Powell, 1991). For some students, negative parental experiences with general debt can lead to extreme student debt aversion (Zerquera et al,2016).

    As countries globally rely increasingly on student loans to fund higher education, many more students will become second-generation borrowers. Because their parents had to repay their own student debt, the family’s financial assets may be depleted, potentially leading to reduced levels of parental financial support for higher education. This is likely to be even worse for students whose parents are still repaying their loans. In addition, parental experiences of student debt could influence the advice they give their children with regard to higher education financial decisions. As a result, this new generation of student borrowers will face challenges that their predecessors did not, fuelled by the transmitted experience of student loans from their parents (Figure 1).

    Figure 1 – Parental influence on second-generation borrowers

    As the share of second-generation borrowers in the student body increases, the need to understand the decision-making process of these students when it comes to (financial) higher education choices is essential. Although the challenges faced by borrowers will emerge at different times and with varying intensity across countries — depending in part on loan repayment formats — we have an opportunity now to be ahead of the curve. By researching this new generation of student borrowers and their parents, we can better assess their financial dilemmas and the support they need, providing further evidence to design future-proof equitable student funding policies.

    Ariane de Gayardon is Assistant Professor of Higher Education at the Center for Higher Education Policy Studies (CHEPS) based at the University of Twente in the Netherlands.

    Author: SRHE News Blog

    An international learned society, concerned with supporting research and researchers into Higher Education

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  • Higher education should lift students out of poverty – not trap them within it

    Higher education should lift students out of poverty – not trap them within it

    As a former student who benefited from welfare payments, I’ve long been consumed with the educational struggle of students on free school meals (FSM) —the official marker we have of relative poverty.

    That’s why I found recent newspaper headlines in autumn 2024 celebrating “record numbers” of poorer students entering university so troubling. On the face of it, this sounded like welcome progress. But this “record” in fact reflected a grim reality: rising numbers of pupils qualifying for free school meals in a growing bulge of 18-year-olds in the population.

    The government’s framing of the latest university admissions figures as good news was unwittingly celebrating rising levels of poverty. A pupil is eligible for free school meals (FSM) if their parent or guardian receives benefits or earns an annual gross income of £16,190 or less. As of January 2024, a quarter (24.6 per cent) of school pupils in England were on FSM – up from 18 per cent in 2018. This rapid rise meant that in the 2022–23 university intake, around 57,000 FSM students were enrolled (alongside 300,000 non-FSM students).

    The 2022–23 academic year will be remembered for an ignominious distinction – the university progression rate for FSM students declined for the first time since records began in 2005–06. The gap in degree enrolment between FSM and non-FSM students widened to a record-breaking 20.8 percentage points (29 per cent versus 49.8 per cent). A meagre 6.1 per cent of FSM pupils secured places at the UK’s most selective universities.

    These statistics are a damning indictment of our collective failure to uphold the principle that university should be open to all, regardless of background.

    Heating and eating

    This year’s Blackbullion Student Money & Wellbeing Survey, now in its fifth year, brings with it more alarming data, shining a harsh light on the lived realities of these university students. The findings are based on 1200 students, surveyed across the UK. This year they are also categorised by measures of disadvantage, including whether students have been eligible for FSM at any point during their school years.

    Almost three-quarters (72.94 per cent) of FSM students said they’d been too hungry to study or concentrate, compared with 47.32 per cent of their non-FSM peers. Nearly seven in ten (67.82 per cent) said they’d been too cold to focus, avoiding heating their homes because they couldn’t afford it (compared with 42.39 per cent of non-FSM students). They are also much more likely to report not being able to study because they are unable to purchase books. Just under half worry that work commitments get in the way of their study. More than eight in ten worry their final degree grade will be harmed by their lack of money.

    These latest findings lay bare the inequities that scar our higher education system—a system that should lift students out of poverty, not trap them within it. As someone who benefitted from a full maintenance grant during my own time at university, these reports of hunger, cold, and financial stress are heartbreaking. I know what a lifeline financial support can be. My termly cheques were a godsend, enabling me to focus on my studies without having to worry about affording the next meal or keeping the heater on in my room. Shorn of basic support, it’s been little surprise to me that recent waves of FSM students have been far less likely to complete their degrees compared with their better-off counterparts.

    Failure to maintain

    It’s time to reintroduce maintenance grants for FSM students in England as part of the new financial arrangements for universities being considered by the Labour government. The removal of grants in 2016 has meant that FSM students are graduating with the largest loan debts. This could understandably be putting many off applying to higher education in the first place.

    At the same time, maintenance loans should increase with inflation, building on the 3.1 per cent rise already announced for 2025–26, going some way to help all students facing immediate hardship while at university. This would be a fair settlement and mirror similar arrangements in Scotland.

    As education officials brace themselves for the toughest of government spending reviews, I don’t underestimate how hard it will be to fund such a reform. But to fail in this task would be a national travesty, betraying not only these students but also the very principle that a university education should be accessible to all, no matter their background or economic circumstances.

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