Charlie McConalogue (Donegal North East, Fianna Fail)
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I wish to raise the issue as to how it came to pass that the Department of Education and Skills signed off on and worked with Bank of Ireland on a punitive interest rate of 10.8% for postgraduate loans to be provided to postgraduate students. In last December's budget, the Government signed off on the abolition of postgraduate grants for new students entering third level from this year. At the time, Fianna Fáil stated this was a wrong and illogical decision from both a social and an economic point of view. One must ensure equality of access at both undergraduate or postgraduate level. It is vital to the future of the economy in respect of producing highly skilled graduates and of attracting high-skill jobs. According to the figures from the 2010-11 academic year, 34,740 people studied at postgraduate level, which constitutes an increase of 26% on the figures from five years previously. According to the most recent figures available, 6,720 people, out of more than 21,000 full-time postgraduate students, availed of a postgraduate grant last year. This constitutes an overall proportion of approximately 31% of postgraduate students who availed of and qualified for a maintenance grant and therefore for their fees as well.

Before the general election of 18 months ago, the current Minister for Education and Skills, Deputy Quinn, was seen posing for photographs with the Union of Students in Ireland, while promising not to increase third level registration fees.

In addition, he promised to row back on a previous increase of €500. If we fast-forward to after the general election, the party's spokesperson on education and now Minister for Education and Skills, instead of standing in a photograph with students, was standing in a photograph with the CEO of the largest bank in the country, encouraging students to take a loan from the bank at an interest rate of 10.8%. This is the Minister who went back on his previous promise not to increase registration fees and also abolished maintenance grants for post-graduate students meaning that they are now liable for fees and those who previously qualified for a maintenance grant are no longer eligible.

How did the Minister sign off on a grant from the Bank of Ireland that had a punitive interest rate of 10.8%? These are potential future customers of the bank whom any bank would be more than glad to have. Therefore one would expect they would offer very attractive rates to get them in. Instead the Minister for Education and Skills appeared in a photograph and encouraged students to take up loans at that rate. Several credit unions are offering education grants to undergraduates and postgraduates at interest rates of approximately 6%. How did the Minister end up agreeing with the banks and endorsing a rate of 10.8% being applied to students to be paid back when they leave college?

What happens if a student is refused a loan? Will the State provide some sort of guarantee that will ensure that students - even those without a strong credit rating - will have access to postgraduate education? Does the Minister of State consider this is a fair and viable option for students? Given the Government's record of abolishing the post-graduate grant for students, can the Minister of State give a guarantee today that the undergraduate grant will not be tampered with and will be maintained?

Ciarán Cannon (Galway East, Fine Gael)
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I am taking this important matter on behalf of the Minister for Education and Skills, Deputy Quinn, and I thank Deputy McConalogue for raising it. The Deputy is referring to a recent announcement by Bank of Ireland regarding its postgraduate loan initiative for current and prospective students, providing finance for fees and living costs. The approach to dealing with the current difficulties in the public finances has meant that in making very difficult choices, the burden has been spread as fairly as possible.

New students entering postgraduate courses from the 2012-13 academic year onwards will not be entitled to maintenance payments under the student grant scheme. However, payment of tuition fees is being maintained for those who are least well off. In the circumstances, the Department, with support and advice from the National Treasury Management Agency, met a number of commercial providers to discuss the provision of a loan product to enable postgraduate students to have access to credit to meet the cost of pursuing their studies. Following these discussions, Bank of Ireland developed a proposal for a postgraduate loan initiative which was launched on 7 August.

The features of the postgraduate student loan are considerably more flexible and affordable than standard unsecured personal loans. I understand that the repayment schedule provides for a significant period of interest-only payments and that, as the loan is variable, the student can pay off the balance of the loan early, without any fees or charges, to further reduce the overall cost of credit. In addition to loans for fees, a maintenance loan of up to €2,000, which will be paid directly to the student, is available to those students who previously received a maintenance grant at undergraduate level. This will help to ensure the additional loans being made available for living costs are targeted towards those who need them most. Full information on the terms and conditions of the loan is available from Bank of Ireland.

Charlie McConalogue (Donegal North East, Fianna Fail)
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I am very disappointed that the Minister of State did not outline why the best the Minister could do when negotiating with the banks for a loan scheme was an interest rate of 10.8%, particularly when credit unions, with which the Government did not engage, are able to offer students loans at a rate of 6%. It is a pathetic effort on behalf of the Government that this is the best that can be done, particularly coming from a Government that had promised not to increase the fees for which those students now must find the money. The Minister of State's party promised to introduce a student loan scheme to be backed and operated by the State. This is similar to schemes in other countries where loans are available to students at interest rates close to zero. We only need to look across the water to Britain for an example of that.

I ask the Minister of State to outline how such a punitive interest rate is being charged. Having broken previous promises to students, how did the Department fail to strike a better bargain with banks, given that it encourages very good future customers who will prove to be among the most profitable? However, that bank is charging an interest rate of 10.8%. Having let them down on previous promises, how was such a pathetic deal reached on behalf of students by the Government?

Ciarán Cannon (Galway East, Fine Gael)
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The current variable interest rate of 10.8% APR is below the existing standard unsecured personal loan rates, which are 14.8% APR for a loan of less than €5,000 and also below the existing standard student loan rate of 11.9% APR. If, as the Deputy has said, credit unions are offering rates substantially lower than the 10.8% offered by Bank of Ireland, I am sure postgraduate students are more than capable of making the right decision in choosing the financial institution to support them in their postgraduate education.

There is considerable flexibility in this loan that would not be available under normal circumstances. The schedule provides for a significant period of interest-only payments and as the loan has a variable as opposed to a fixed-interest rate, the student can pay off the balance of the loan early without incurring any fees or charges. This loan initiative developed in conjunction with the NTMA will ensure in these very difficult times that postgraduate students will be able to access funding to pursue their studies.

This is a challenging time. The Minister, Deputy Quinn, had to make some very difficult decisions on whom we would support with the very limited resources available to the Department of Education and Skills. The challenge, as the Deputy is well aware, is that 70,000 new students are about to enter the educational system and this will require significant investment in infrastructure. In making these difficult decisions, the Minister, Deputy Quinn, engaged with the NTMA and a number of different lending institutions to secure the best possible deal at this time for students who wish to access finance for their postgraduate studies.