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This year has been eventful for the English higher education system… and not only because of Brexit. The financing system has been under heavy criticism, after the relative success (although not the win) of the Labour Party in the June elections campaigning on free higher education. Since the elections, criticisms of the system have been piling up, including reports about debt at graduation, the lack of variable pricing, and even at some point the pay of vice-chancellors. It is time to take a closer look at what is happening in England, as the House of Lords Economic Affairs Committee and the House of Commons Education Committee (among others) are all directing inquiries in the matter, while the government just announced an additional review.
A short history
In 1998, the English government introduced means-tested tuition fees up to £1,000 per year ($1,318), and expanded its previous maintenance student loans system making repayment income-contingent. At the same time, maintenance grants for low income students were abolished, leaving them to rely solely on maintenance loans.
In 2006/07, the government-set cap on tuition fees was increased to a maximum of £3,000 per year ($3,955) – no longer means-tested – and income contingent loans (ICL) were extended to cover tuition fees. Means-tested grants for poorer students were reintroduced, while all students continued to get loans towards their living costs.
In 2012/13, the money universities received from government for teaching was cut and replaced by income from higher tuition fees. The maximum tuition fees universities could charge tripled to £9,000 per year ($11,865). In compensation, the threshold for the repayment of ICL for tuition fees and maintenance increased from £15,000 to £21,000 ($27,694). Graduates pay 9% of their income above this threshold until the debt is paid off. After 30 years, any outstanding debt is forgiven. Actual interest rates were introduced (they were previously limited to the maximum between the Bank of England base rate + 1% and inflation): inflation plus 3 percent for the length of studies and then inflation plus between 0 and 3 percent depending on individual earnings. A new scholarship program was introduced only to be abandoned in 2015.
In 2016, the English government abolished maintenance grants replacing them with loans and also ended bursaries for nursing (thus reducing its deficit, to which grants contribute but not loans!), making all students contribute the full price of their education through ICL. In 2017, another tuition fees raise was announced to £9,250 ($12,195).
Faced with opposition and great criticism of the system, Prime Minister Theresa May recently yielded and announced a major review of student finance and university funding, at the same time as she implemented a tuition fees freeze and increased the loan income threshold of repayment to £25,000 ($32,969).
Successes of the system
Despite what the media says, not all is black in English higher education funding, the reforms have led to some important achievements.
The income-contingent loan system is not being criticised. Making higher education free at the point of entry and tying repayment to future income seems to be a sound economic move. High-earners will repay their loans in full while those with lower incomes do not repay and are therefore subsequently subsidised by the government.
The introduction of tuition fees has increased universities’ financial resources, successfully, increasing the funding per head that had been decreasing from the early 1990s. Additionally universities are no longer reliant solely on government funds to meet the costs of teaching, and therefore are competing less against other public services. Research has also shown that, in general, access in England has widened in parallel to tuition fees increases, therefore dismissing (at least until recent cut to grants) the worries around access and equity.
But current critics of the system point to many issues that need to be revised to make English higher education more equitable and more accessible to all.
Absence of tuition fees differentiation: When tuition fees of up to £3,000 were first introduced in England, the idea of the government was to establish a cap, and their hope was that tuition fees would vary from one HEI to another or by subject and so would create a higher education market. This has failed dramatically, with all universities in England charging the maximum tuition fees for all of their degrees. In 2015, the cap on the number of students was lifted to try and encourage competition. As a result, there is an incentive today for universities to increase recruitment in low-cost subjects to generate more revenue. There is also discussion around whether students are getting value for money.
Debt at graduation: A 2017 report from the Institute for Fiscal Studies (IFS, a British Think Tank) states that the average debt on graduation under the 2017 system for English students would be £47,000 ($61,981), including £5,400 ($7121) of interests accrued while studying. The recent reforms particularly weigh on the poorest students, with students from the 40% poorest families graduating with £54,000 ($71,213). This overall makes debt at graduation in England the highest in the Anglophone world – even higher in average than in private American universities – and probably one of the highest if not the highest in the world.
Grants: Abolishing all governmental student grants – including bursaries for teachers and health workers – might well be the most regressive HE reform taken by the English government in recent years. Grants are prevalent in higher education as a way to allow those from disadvantaged backgrounds to participate and to incentivise field choices towards public service professions. The complete lack of grants – for tuition fees or maintenance – in the current higher education system is no less than an aberration. In particular, while loans are becoming more acceptable to pay for tuition fees, they might be less accepted to cover the cost of living among low-income populations, and therefore maintenance grants are a necessity.
Part-time students: The number of part-time students in England has been sharply decreasing, in part because of the current financing system. The high tuition fees for part-time studies, as well as eligibility issues for the ICL system have created difficulties specific to those students.
Repayment rate: The English system uses the Resource and Accounting Budgeting (RAB) measure to evaluate how much the government will get back on student loans. In 2017, the IFS estimated an RAB of 31.3%, that was increased to 45% after the most recent changes announced by the government (tuition freeze and increase in the repayment threshold). This means that for every £100 a student borrows, the government will get back only £55. They also estimate that 83% of graduates will not repay their loans in full. This makes these latest changes quite expensive to the government and highlights the extent of the “hidden” government subsidy.
Conclusion
The current ICL system in place in England might very well be the right one, but adjustments of the parameters are without doubt needed. There is hope that the many consultations and reviews will yield positive changes for the system and make higher education in England more affordable and more equitable for future generations.
Dr. Ariane de Gayardon is a Research Associate at the UCL Institute of Education Centre for Global Higher Education. Her research focuses on the funding and financing of higher education systems from an international perspective.
