Just like now the answer to this lies in which university they go to and what they will earn after graduating and what their family income is when they’re at university.  If they go to one of the vast majority of universities which will have their tuition fees capped at £6,000 a year and become a teacher or a nurse they will be better off – if they go to Oxbridge and become a stockbroker or an MP they’ll be considerably worse off. 

As to maintenance grants for living costs whilst at university, if they come from a family with an average income or below, they will get a considerably bigger grant than now (which they won’t have to repay), but if their family income is above £42,000 they will be worse off because they won’t get any grant.  However, unlike now, maintenance loans will not be means tested and therefore not linked to the family income.

To help get your head around this I’ve prepared the following tables which show what a graduate will pay going to university in 2011 and what will happen after the changes as currently proposed are introduced in 2012.  The current figure is based on the £3,375 cap on next year’s tuition fees (Oxbridge universities can charge more) and the future figure is set at the proposed £6,000 cap because only a handful of universities will be permitted to charge above this in exceptional circumstances. 

However, what is clear is that news media claims that on average graduates will have debts of over £30,000 after university are completely untrue, unless they’re going to spend all their time partying and then they won’t graduate and won’t pay back their fees!

I’ve not included interest repayments because both the present one based on the Bank of England Base Rate plus 1% and the future rate based on the Retail Price Index and tappered from zero at £21,000 to plus 3% at £41,000 are difficult to predict and compare.   Eighteen months ago the RPI was a minus figure and base rate was at over 5%, now base rate is at under 2% and RPI is at 4% – so you see my point!

As you can see, due to both repayments being 9% of monthly income, in all cases the monthly amount to be paid back before interest through income tax for the proposed higher tuition fee is actually less than the amount graduates will have to pay back at the same income with the current fees, because current repayments start at £15,000 whereas the proposed future repayments will start at £21,000. 

This is especially important for mortgages, because graduates paying back the new fees will have more income after tax.  Moreover the Association of Mortgage Lenders have agreed that, as now, its the gross income of the graduate that will be used to calculate offers – the outstanding tuition fee will not be taken into account.  Of course, those earning under £21,000 will pay back nothing at all under the proposed system.  This threshold will be indexed linked so it will rise in line with inflation.

Also, payments will only be made when income is being earned above the £21,000 threshold, so the new system is better for women, who do more often take career breaks and work part time, and taking breaks from waged employment does not extend the 30 year maximum repayment limit.

As to maintenance grants, students from families with household incomes up to the UK average of £25,000 will have a full grant of £3,250 per year to cover living costs whilst at university (which they will not have to repay ever), compared to the current grant of £2,906.  Above £25,000, students from families with incomes up to £42,000 will receive a partial grant.  However, students from families with incomes over £42,000 will no longer receive a partial maintenance grant.