| Practice area: | Education and Labour Markets |
|---|---|
| Client: | Royal College of Nursing |
| Published: | 11 April, 2023 |
| Keywords: | economics of education higher education 2023 Labour Market Economics Public Policy |
London Economics were commissioned by the Royal College of Nursing to assess the economic costs associated with introducing loan forgiveness for nurses after the Department for Education’s recent proposals following the Augar review of post-18 education.
Under the Department’s response to Augar, the reduction in the repayment threshold (and slower uprating) and the extension of the repayment period increases the costs borne by low and middle-income graduates. As a result, under the Augar system, almost all nursing graduates will experience a significant increase in their lifetime loan repayments. The elimination of real interest rates guillotines the repayments made by the highest earners, as they are able to pay off their loans more quickly. Therefore, high-earning graduates benefit significantly from the Augar proposals.
Given the differential impacts on low/middle-income graduates vs. high-earning graduates, the changes under the Augar system are deeply regressive. Nursing graduates are disproportionately negatively affected by the proposals, as they are typically at the lower end of the overall graduate earnings distribution.
The analysis assumes the same loan repayment terms as proposed by the Department for Education, but models the impact of an introduction of loan forgiveness for nursing graduates working in the NHS, where:
- 30% of their loan balance is written off after 3 years in the NHS;
- 70% of their loan balance is written off after 7 years in the NHS; and
- 100% of their loan balance is written off after 10 years in the NHS
The introduction of loan forgiveness is more costly than the Department proposed approach (but less costly than the current approach faced by students commencing their studies in 2022/23). However, this proposed approach reduces both lifetime repayments for nurses working in the NHS, as well as monthly repayments (addressing affordability issues).
Given the high rates of attrition in the nursing profession, serious consideration should be given to loan forgiveness
The Full analysis and supporting methodology is available here