Unlimited tuition fees – does that mean unlimited student loans?

The student finance debate continues

The BBC is reporting the Browne report on higher education, due out this week, will lift the cap on tuition fees for English universities. That’s worrying enough, but my concern is how will this work? Will we continue to have official student loans that cover all UK fees set at no more than the rate of inflation? If not, I think this could sound the death knell for meritocratic education in the UK.

At this point, I should declare both that I am currently a university governor (the LSE), and that this site and I have worked with the department for higher education for a number of years helping to communicate how student finance works (see parents guide to student finance). Both are reasons I wanted to ROUGHLY jot down some musings on this.

However, I have no more knowledge of what’s being proposed than what I’ve heard in the news bulletins, so much of this is supposition.

Universities need more money

Universities are rightly complaining about a lack of funding. The amount of money going to them has been cut radically and foreign students are often needed simply to subsidise the cost of education. With the spending cuts being announced, there’s no doubt the state funding simply isn’t available, so something needs to give somewhere. With student numbers as they are right now, to return us to the old fashioned grants system would probably cost the equivalent of adding 5 to 10p per pound on everyone’s basic rate of income tax.

This means, I think, that variable tuition fees are probably a necessary evil. Our top universities need a high level of funding to keep them internationally competitive, and the best ones will be able to attract interest at higher rates. Yet I would suggest a number of safeguards should be put in place and I worry from what I’ve heard in the news that these may not happen.

  • Student loans should always cover fees and maintenance


    To increase fees, we will need to radically increase the amount available to students. The current system works well. No one needs to pay for their education at the point they go to university, you only pay for it if you’re earning over £15,000 once you’ve left, and only then in proportion to what you earn (9% of everything above £15k).

    This should remain a binding principle. No one should be able to say “I can’t afford to go to university” – the funding should be there, and the debt only repayable if you then get the success due after graduating.  This safeguards the principle that we have inclusion based on academic merit rather than finance.

    Of course, the current system doesn’t work perfectly (often because of myth and misunderstanding about the finances, and that loans aren’t quite big enough) but it’s at least structurally sound (see the student moneysaving guide for more info).

    To keep this principle, if we are going to increase tuition fees for some institutions, we need a binding promise that every student who wants one will get a loan that will cover ALL their fees and maintenance (living allowance) alongside.


  • There should be a cap on fees


    Even if we allow institutions to set their own fees, it should be within a regulated structure. Not setting a maximum limit runs the risk that premier institutions will set prices at a level to cut all but the wealthiest out of the market. Plus the fact that the state will need to supply big enough loans to pay them.


  • There should be no real interest rate


    It’s also being discussed that the interest charged will no longer remain linked to the rate of inflation. It seems those earning lower amounts will be charged 0% and those earning higher salaries will be charged commercial rates of interest.

    This is the bit that scares me most. We have already educated a generation of students out of the stigma of debt, and now the proposal means we will EITHER educate some out of a stigma of borrowing at commercial rates of interest OR those who fear it will be put off going to university. 

    I think this is neither worthwhile, nor fair. Those who earn more will already pay back more quickly and thus their interest rate subsidy is substantially smaller.  For those who are just over the cusp of the level of earnings for the interest to jump, they’ll accrue interest at a relatively high rate on salaries that aren’t super high, effectively being penalised for earning more.

    It would take a lot to persuade me this bit is sensible.

That’s my initial reaction. There’s also some thought that the increasing massification of higher education ends up being damaging. Now we have so many graduates, its job market promoting power has been diluted somewhat, with some studying despite not seeing a vocational gain (though hopefully the social development uni brings is still helpful). We are now close to the point where we must question ‘who should go to uni?’

Yet the corrolary to that is by increasing the numbers in higher education we have increased access to those who wouldn’t have previously gone. By closing down access you may return to the days where university was for those of ‘means and class’ rather than of ‘talent and endeavour’, which we should hope it is for.

Either way, it’ll be interesting to see what the proposals actually are. I’d love to read your views (see the links below).

Comment and Discuss