The deep rooted problems involved in financing British higher education have been revealed in a recent report. Major factors in the “unsustainable” system are loans not expected to be repaid and no limits on the numbers of students going to University.
The report, compiled by the Higher Education Commission, a cross-party group of MPs and representatives from business and academia, warned that the current system of fees and loans is the worst of all worlds, and is unsustainable for the future: “An experiment is under way, with potential consequences for English higher education stretching decades into the future.”
It points out that the government is investing heavily but getting no credit for it. Students feel they are paying substantially more despite having debts written off, and universities are being seen as rolling in tuition-fee money when their grant has been cut and fee income has failed to rise with inflation.
“We have created a system where everyone feels they are getting a bad deal and this is not sustainable,” the report argues.
“Experiment that failed”
Megan Dunn, NUS vice president, welcomed the report saying: "Forcing debt onto students as a way of funding universities is an experiment that has failed not just students but our country."
The report’s author, Ruth Thompson, a former senior civil servant in charge of higher education, who chaired the commission argued the issues needed confronting. “If everybody were to ignore the importance of debating what to do next and everyone said nothing needed doing, that everything is as it should be, that would be concerning.”
Publication of the 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.
Andreas Schleicher, special adviser on education policy at the OECD, said: “The UK (and Australia too) have squared that circle with a combination of income-contingent loans and means-tested grants,” arguing that worries about shifting the risk to government are flawed because the added tax income of graduates who end up in employment is many times larger than any conceivable bad debt. “That’s why everyone wins and it is the most sustainable approach.”
Only one in four students will repay their debt
But the Higher Education Commission report says a new model is needed. It urges the government to reconsider and to follow the committee’s recommendation for a review.
An acute problem is the amount of debt built into the system, under which tuition fees of up to £9,000 a year are charged, financed through loans that students repay once they begin earning more than £21,000, and written off after 30 years. According to the Institute for Fiscal Studies, students will graduate with an average of £44,035 in student debt, compared with £24,754 if the reforms had not been introduced, and 73% of graduates will not repay their debt in full, compared with 25% under the old system.
Financially risky
The idea of the state underwriting these debts – predicted to be £330bn by 2044 – was another concern raised, particularly because of problems with debt collection. The commission wants universities to help trace graduates who fail to repay, including those overseas, and it wants pilot schemes to explore improvements in debt collection by 2016.
Also financially risky, according to the report, is the attempt to introduce market forces to a sector that does not operate as a market.
“It isn’t a consumer good,” says Thompson. “The issue then is whether you can place a reliance on the kind of market mechanism you would use in the consumer market. We weren’t convinced you could.”
The report argues that 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, it concludes, “has been to leave a sector, public, and political parties that are nervy around reform, characterised by differing opinion and mistrust”. Hence a reluctance to make the kinds of decisions it argues are needed in the run-up to next year’s general election.
With the higher education policies of the three main parties still unclear, the report discusses possible alternative funding models, including the graduate tax and lower £6,000 fee favoured by many in the Labour party, and the possibility of differential fees or lifting the fee cap.
Yet while the report insists that something needs to be done, and suggests various possible actions, it falls short of advocating one solution over another, arguing that the decision requires political judgments about potential winners and losers.
