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Master’s degree loan scheme boosts inclusivity, study finds

Posted on 23 July 2020

A loan scheme has enabled more graduates from disadvantaged backgrounds to progress onto studying for a masters, a major new study has found.

The new study, which looked at the next steps of more than 1.3 million graduates with a first degree in the UK, suggests that the introduction of the master’s degree loan scheme in England in 2016 substantially broadened the socioeconomic class of people able to further their higher education.

Assessing a five-year period (three years prior to the loan scheme and two following it), the research shows that master’s degree enrolment rates increased by 9,305 graduates, in England alone, during the first year loans were introduced.


The gap in socioeconomic class between those studying for a master’s reduced substantially. In the academic years before the loans were introduced, 6.8% of graduates from lower socioeconomic backgrounds progressed to a master’s degree, compared to 9.1% from higher socioeconomic backgrounds. After the loans were introduced, progression rates for these two groups were 12.6% and 13.7% respectively.

The study also revealed that progression rates on to a master’s increased the most among graduates from British Black African, British Black Caribbean and British Bangladeshi backgrounds, going up by 6.9%, 6.2% and 5.8% percent points respectively.

The findings suggest that many talented people may have been missing out on furthering their education in the past simply due to their socioeconomic background, the authors of the study say.


Joint author Professor Paul Wakeling, from the Department of Education at the University of York, said: “Our research indicates the loan policy is a marked success, since expanding and widening participation were amongst the declared intentions. In the social scientific study of education policy, it is unusual to find such clear evidence of narrowing inequalities following a policy.”

There is a significant body of evidence that suggests master’s degree graduates typically obtain better outcomes than those holding first degrees alone.

Recent research by the UK Office for National Statistics (2019) shows that individuals with a master’s or a PhD earn, on average over their lifetime, £65,000 more than those with an undergraduate degree, a 10% premium.

Prior to introduction of state-sponsored master’s loans, the option of furthering study was financially out of reach for many. Full-time equivalent prices for UK students are thought to range from about £4,900 a year to over £30,000, with prices averaging around £11,000 (UCAS, 2018). In 2012/13, 72% of full-time UK-domiciled master’s students were self-funded.

In 2016/17, the non means-tested loan for master’s study was introduced in England, with devolved governments in the other three UK nations following suit in the following years.

Narrowing gap

The research team looked at data from the Higher Education Statistics Agency (HESA) and found that it was in fact a lack of access to credit, rather than debt aversion, which may be key in helping more study for their master’s.

In addition, following the introduction of the loan, they witnessed significant narrowing of the gap in socioeconomic backgrounds, while the gap in progression rates between graduates from pre-1992 and post-1992 institutions reduced significantly.

Graduates in the Biological Sciences benefitted the most from the master’s loans scheme.

Despite declaring the scheme a success, co-author Dr José Luis Mateos-González, also from the Department of Education at the University of York, added there are some notes of caution to sound.

Graduate labour market

“While it is good news that the loans scheme appears to have had a positive impact on BME students, it should be noted that previous research suggests that BME graduates are more likely to pursue strategies of further compensatory education in order to counterbalance the problems they may face when entering the labour market,” Dr Mateos-González said.  “In other words, we need further research to determine whether BME graduates are turning to postgraduate degrees to get around discrimination in the graduate labour market.

“Additionally, the loans policy has not shifted gender differences in transition to taught higher degrees among UK-domiciled students. Women remain disadvantaged here, contrary to observed trends at earlier levels, including undergraduate participation. While there may be improved transition rates for those from disadvantaged socio-economic backgrounds and ethnic minority students, the reasons for and consequences of these changes is not clear.

 “The loans scheme has the potential to be a victim of its own success due to twin inflationary pressures. Firstly, fee inflation is likely – and anecdotally already occurring – as institutions react to increased demand and the availability of loan funding by increasing their tuition fees for UK students.

“Second, credential inflation is likely as an increase in master’s graduate’s risks eroding the value of a bachelor’s degree, making a master’s degree necessary for entry to certain careers. There are other possible drawbacks. Extra ‘deadweight’ is one: looked at in absolute rather than relative terms, more students from advantaged backgrounds have benefitted from loans.”

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About this research

The study is published in the Oxford Review of Education.

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