Students discussing in a classroom

This week, the Higher Education Commission’s report Too Good To Fail has claimed that England’s current university funding system is unsustainable due to the high number of students who will never be able to afford to pay of their loans after graduating. The study has examined the sustainability of the financial arrangements for England's universities, taking evidence from 60 expert witnesses.

In the current funding system “everyone feels like they are getting a bad deal” and it “represents the worst of both worlds” claims the commission, which was set up to create a better informed debate on the university sector, with representatives from education, business and political parties. 

The government is investing heavily in higher education (by writing off student debt) and getting no credit for it; students feel as though they are paying substantially more and not getting the teaching and facilities they deserve; and universities, although been seen by paying individuals as rolling in tuition-fee money, have, in fact, had their grants cut (by the government) and the fixed fee cap means they have seen their income fall in real terms.  

Far from introducing more diverse learning models, the 2012 reforms, which followed the 2011 higher education white paper "have resulted in zero price variation, little expansion of new offers for students and minimal innovation in teaching and learning". 

But their most damaging legacy is that it has left a sector that the public and political parties that are nervy around reform, characterised by different opinion and mistrust. Hence there’s a distinct reluctance to make the kinds of decisions needed in the run-up to next year's general election. 

The state of student debt

Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, when debts are automatically wiped. Overall the study estimates that 73% of all students will be unable to pay back their loans at the end of the payment period. 

This funding “black hole” is forcing the Government to indirectly subsidise higher education, writing off billions of pounds in student debt, predicted to be £330bn by 2044 - even though the point of £9,000-a-year fees was to make the universities less reliant on the taxpayer. Furthermore, publicly generated resources from taxes and borrowing are being used to fund loans and so are not available to be spent elsewhere. 

According to the Institute for Fiscal Studies, the average student debt will be £44,035, which is an even higher figure than the US. This can be compared to £24,754 and 25% not being able to pay their student debts in full had the reforms not been introduced.

The Commission focuses on middle earners, those in the health professions, teachers or public sector workers who need a degree to enter their profession, and “questions any system that charge higher education at a rate where the average graduate will not be able to pay it back" and "where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment".

In fact, under this scheme you will have to be earning over £51,000 a year to be eating into the capital on your loan, while currently only 14.7% earn over £41,452 and 49% attend university

This Autumn, the cap on the number of students each university can recruit is being lifted and this raises the prospect of some weaker universities which lose students to other institutions facing “financial difficulty and potential failure”. If some universities were to fail this would offer a significant reputational damage to the whole sector, and could even impact the most prestigious university. 

The commission argues that the lifting of the cap next year, will lead to a three-tier university system: one group, the most selective universities, unlikely to expand as they tend not to want to grow with undergraduate numbers; a second group with a mixture of selective courses and others less popular, expanding as much as they can; and a third group, which previously recruited heavily through clearing facing pressure to keep up numbers. To stave off potential closure, they will recruit students who are “underqualified or, more importantly, might be more suited to further education or an apprenticeship”. “The potential for reduced quality and high non-completion rates would be very real,” the report claims.

Rejecting a student finance system review

The publication of this report comes just two weeks after the government rejected calls for an urgent review of England's student finance system from the Commons business, innovation and skills committee, which argued that the UK was reaching a "tipping point" in terms of its financial viability. The government responded that there was "no imminent pressure on the system", citing the support of the Organisation for Economic Cooperation and Development (OECD), which has described the UK as the first European country to establish a sustainable approach to higher education funding. 

Many governments in Europe end up compromising on the quality of higher education and restricting access because they neither put in enough money to support higher education nor allow universities to charge for tuition. However, allowing institutions to charge tuition fees and puts the burden entirely on families, or relies on commercial loans, and risks benefitting only the most wealthy who can afford university. 

The Commission's recommendations

The Commission makes a series of recommendations to overcome its concerns. These include:

  • Lowering tuition fees to £6,000 would reduce student debt, but it would leave an estimated £1.72bn funding gap for universities.
  • A graduate tax would require government to borrow £4bn to fill the gap between ending fees and the arrival of tax revenues - and such a tax would mean there was no clear link with the value of a particular course. 
  • Removing the £9,000 upper limit on fees would allow more money for universities and clearer competition, but higher fees would mean even higher levels of public subsidy for loans. 
  • Different charges for different universities or courses could also reduce the number of graduates from expensive courses with higher fees even if they were essential for the economy. 

They also recommend removing international students from the net migration figures and allowing them to work in the UK for two years after graduation. This, it argues, would enable universities to recruit more students from abroad on higher fees. Other key points include working out a better strategy to recoup debts from students living abroad. However, they do reject financing student loans through sale of the student loan book, having heard hardly any evidence in its favour.

Calls for free higher education

However, in all the recommendations, we forget to note that the OECD has calculated that for every pound invested by the state in higher education, three additional pounds of national income are generated. That in itself is evidence enough to favour funding through general taxation.

The National Union of Students has, this week, has produced a roadmap as to how this can be done, and argues that it is a good deal for both students and for the country.

We just need to remember that we can't compromise on the quality of education along the way, as this will decrease the sought after three-for-one return.

Image Credit: Indiana University, CC BY-SA 3.0 via Wikimedia Commons.