3 Funding: tuition fees and student
finance
Introduction
42. Under the current system of higher education
funding, publicly-funded higher education providers in England
receive income from two principal sources: tuition fees, which
are backed by Government-funded loans; and a separate teaching
grant from the Higher Education Council for England. As well as
offering tuition fee loans, Government also currently offers means-tested
maintenance loans and maintenance grants for students from the
least wealthy backgrounds.
Teaching grant
43. Receipt of teaching grant from the Higher
Education Funding Council for England (HEFCE) is one of the defining
characteristics of a "higher education institution"
under the Further and Higher Education Act 2004, and is the principal
distinction between traditional universities from 'alternative
providers' (which we discuss later in this Report).
44. The teaching grant is calculated by allocating
courses or subjects to four broad cost 'bands': universities then
receive a unit amount per student studying in each cost band:
Band A is worth around £17,800 per student and
covers the most expensive-to-teach courses, like medicine and
dentistry;
Band B is worth around £8,700 and is for lab-based
science courses;
Band C is worth around £7,100 and covers subjects
with a fieldwork element; and
Band D is for all other subjects and is worth around
£6,000.[37]
45. The annual block grant is calculated before
exact figures for each year's admissions are known. Therefore,
the number of students in each band is estimated and a margin
of error allowed. This helps to smooth out annual variations in
student admissions and provides institutions with greater certainty
year to year about the amount of teaching grant they can expect.
46. Institutions receive the teaching grant as
a lump sum, which they are free to spend according to their own
priorities, within broad guidelines set by the Higher Education
Funding Council for England. It is common for institutions to
'cross subsidise' subjects which are more expensive to teach (such
as science, technology, engineering and maths) with money from
courses which cost less than the unit amount for their band (most
often arts and humanities courses).
47. In the 2010 Spending Review, the Government
announced "a shift away from public spending [on higher education]
towards greater contributions [in the form of tuition fees] from
those that benefit most and who can afford to pay".[38]
This translated as a cut of 40% in the higher education budget
(including the teaching grant, but excluding research funding
and provision of student loans) by 2014-15, which the Department
for Business, Innovation and Skills described as being "in
line with the Browne Report's recommendations".[39]
48. In its letter of 20 December 2010 to the
Higher Education Funding Council for England, the Government announced
a cut of approximately 8% (in real terms) in the teaching grant
for 2011-12, and indicated that it expected to increase spending
on student loans by £4 billion by 2014-15 (more than doubling
its expenditure on student loans in 2010-11).[40]
Tuition fees
49. The Browne Review recommended that tuition
fees should be un-capped, backed by public tuition fee loans so
that no fee was ever payable up-front. The cost to Government
would be mediated by a Government levy on fees above £6,000
per year. In addition, Lord Browne proposed a basic non means-tested
maintenance loan of £3,750 per year, with up to a further
£3,250 available via a means-tested grant for students from
households with an income below £60,000 pa. This would have
provided cost-of-living support from £3,750-£7,000 per
year for all students, as well as covering their tuition fees.
50. The Government rejected Lord Browne's proposals
for uncapped tuition fees and in December 2010 passed new legislation
to increase the cap on tuition fees from £3,290 per year
to a 'basic maximum amount' of £6,000, and an absolute maximum
of £9,000 which could be charged only in 'exceptional circumstances'.
Students would be entitled to tuition fee loans of up to £9,000
per year, according to the fees charged by the institution they
attend.[41] Part-time
students studying at a level of least 25% intensity (i.e. it will
take them four times as long as a full-time student to complete
the course) would also be able to access pro-rata loans to cover
their tuition fees.
51. Statements made by the Government following
the publication of the Browne Review appeared to imply that a
key purpose of the Review, if not its primary purpose, became
to find savings in the higher education funding system to assist
in deficit reduction. In the 12 October debate following publication
of the Browne Report, the Secretary of State said:
Like many Members, I wanted to ensure that my children's
and my grandchildren's generations enjoyed that free system of
university education. In an ideal world, that is what we would
do, but we are not in an ideal world. We are in a world in which
we have inherited a massive financial mess.[42]
52. He went on to say:
I have already explained the necessity, for economic
reasons, of pressing ahead with these reforms. They have great
advantages in themselves, but they also help us to address the
massive deficit left by the previous Government.[43]
53. The Secretary of State also asserted that
once the economy returned to prosperity, the funding of higher
education would be revisited:
When the Government's economic policies have produced
the successful outcome that we all expect, we can return to the
question of how universities can be supported in a more generous
way, but at the moment we face a massive financial crisis.[44]
Postgraduate education
54. Although the Browne Review addressed undergraduate
study, it did not consider postgraduate study. When we asked him
why his review omitted this important area of study, Lord Brown
told us that his review was asked to work with Professor Adrian
Smith's previous review on that issue. Professor Smith's review
was published in March 2010 before the current Government's reform
of higher education and therefore did not take account of the
significant increase in undergraduate fees. Lord Browne said that
while there was "plenty of discussion" on the postgraduate
study within his team, it concluded that "the less done the
better in this area, for the time being" as they "wanted
to watch and wait before anything else happened".[45]
As a result his review recommended that "we should now examine
and watch carefully what is going to happen in the future as the
undergraduate system is changing".[46]
55. The White Paper states that HEFCE will now
run a consultation exercise on support for postgraduate teaching
but that it would have to be in the context that "the total
funding available will reduce from 2012-13 onwards, in line with
our reforms to funding for undergraduate teaching".[47]
HEFCE will also conduct a review of participation in postgraduate
study, to evaluate the impact of the changes to undergraduate
funding and that the government would "revisit the issue
of postgraduate funding as the new system beds in".[48]
56. It is important that the
increase in undergraduate tuition fees does not act as a deterrent
to potential postgraduate study. We welcome the Government's decision
to ask HEFCE to monitor and review this. We believe that interim
reports from HEFCE may help reassure both students and institutions
and we recommend that HEFCE considers this approach as part of
its work.
Loan Repayments
57. Students who have taken out loans under the
new student support system are, of course, likely to graduate
with significantly higher total debts than at present. However,
the proposed increase in the repayment threshold (proposed to
be set at £21,000) will mean that their monthly repayments
are lower than they would be under the present system, and the
term of the loan is to be increased from 25 to 30 years, meaning
that almost all graduates except those with the smallest debts
or the highest salaries will be in repayment for longer. The introduction
of a 'real' rate of interest also means that many graduates will
in future repay more in real terms than they borrowed.[49]
58. It is important to recognise that borrowing
via student loans is unlike any other commercial debt. Because
repayments and interest rates are income contingent, they are
fixed to the graduate's earnings, not the size of the outstanding
balance and do not begin until the graduate is earning above the
threshold. This also means that, after graduation, neither the
Student Loan Company nor the Government can demand payments above
this level, or insist at any point on repayment of the full outstanding
balance. After 30 years, any outstanding balance will simply be
written off with no penalty.
59. It also appears to be the case that this
debt will not affect a graduate's ability to secure a mortgage.
The Department has made clear that "the Council of Mortgage
Lenders has advised that a student loan is very unlikely to impact
materially on an individual's ability to get a mortgage"
and that "student loan information won't be shared with credit
reference agencies by Student Finance England".[50]
The Minister also explained that "this is one reason why
our proposal to increase the repayment threshold from £15,000
to £21,000 reduces the amount borrowers need to repay each
month, and therefore increases the amount of net monthly income
available to them which could be helpful to them when applying
for a mortgage".[51]
60. Not all graduates will repay their loan within
the 30-year term, the expectation is that around 30% to 50% of
what is borrowed will not be repaid. For many graduates, then,
repayments of their student loan will be indistinguishable from
a 9% tax on their earnings above the repayment threshold, which
stops after 30 years. This was a point made by a number of witnesses
including Libby Aston, Director of the University Alliance group:
In terms of the debt adversity issue, the message
that we really clearly need to get across is that this is not
a credit card debt, it is not a mortgage-style debt, and […]
it is not a pure graduate tax, but it is like paying tax. It is
capped, it stops at some point, but it will feel like paying income
tax, and Professor Barr very eloquently describes the fact that
no parent or potential student loses sleep about the future tax
contribution they are going to be making.[52]
61. The Government should work
with the Higher Education sector to develop a consistent message,
pointing out the limits on repayment, rather than its current
concentrations on slightly lower repayments regardless of the
increased debt.
Annual Loan Statements
62. One crucial difference between the student
loans system and a tax is that graduates will receive an annual
statement on the level of their loan. Dr Mike Clugston, speaking
in a personal capacity, expressed particular concern about the
salaries that graduates would need to earn on graduation in order
for their repayments to keep up with the interest charged on their
loans and so reduce the total balance.[53]
Notes: Assumes RPI inflation of 2.75% each year
For simplicity it is assumed that the total loan
is the same in cash terms each year and courses all last three
years. In reality it is likely to be larger in year two and smaller
in year three.
Breakeven income is where repayments are approximately
interest charges and the cash value of the loan does not increase.
Source: House of Commons Library Student loan
repayments (2011/6/108SG) 16 June 2011
63. For comparison, average graduate starting
salaries in 2010 were around £25,000—£29,000,
although salaries would of course be expected to rise in cash
terms by the time the first cohort of graduates under the new
loans system begin their repayments in 2015-16.[54]
According to High Fliers Research, "[starting] salaries increased
by 7.4% in 2010 and 5.9% in 2009".[55]
64. However, we note that:
Looking at year one breakeven levels can give you
a somewhat misleading impression. It is reasonable to assume that
most people's incomes will rise quite rapidly in the early part
of their career. This means that breaking even is less important
early on when compared to continued employment and rapid early
earnings growth.[56]
65. We acknowledge that some
form of annual statement on the student loan is an essential piece
of information for the graduate. However, we recommend that the
Government and Student Loans Company give serious consideration
to the form of the statement and supporting information to avoid
causing undue concern to graduates about rising student loan balances.
Affordability of the loan system
66. A large number of variables can affect the
likelihood of loans being repaid, including the initial size of
loans (larger loans are less likely to be repaid in full); the
proportions of male and female graduates and their earning profiles
(recent trends show more female than male students, but, once
employed, male graduates tend to earn more than female graduates
and so are more likely to repay in full); and the behaviour of
the economy, including inflation, interest rates and earnings
growth. As the Higher Education Policy Institute explains:
The repayment scheme [is] designed to keep repayments
low and consequently a large proportion of the repayments are
expected towards the end of the 30 year repayment period. This
means that the RAB charge depends on long term forecasts of earnings.
In a response by BIS to a request for information about the longer
term accumulation of debt, we were told that forecasting student
loan repayments 'several decades into the future is inherently
difficult and relies upon a great number of assumptions'. Hence
the RAB is uncertain.[57]
67. The number of assumptions needed is clear
from the Impact Assessment published alongside the White Paper,
which explained that the "costs were estimated by assuming
an average graduate contribution of £7,500, profiling future
expected earnings profiles of graduates to forecast estimated
repayments on loans and assuming take up rates for student support
of 90% for fee loans and 80% for maintenance loans".[58]
68. The Interim Impact Assessment published alongside
the Regulations raising the fee limits was based on an estimated
RAB charge of 28% of the loan book.[59]
In the full Impact Assessment accompanying the White Paper, this
estimate was increased to 32% "because of changes in the
income threshold at which repayments start to be made by graduates
(changing to annual from 2016 rather than being up-rated every
5 years)".[60] As
it became clear that universities were setting tuition fees significantly
above the £7,500 per year used in the Government calculations,
analysis by the Higher Education Policy Institute, London Economics
and the Institute for Fiscal Studies suggested that the Government's
estimated RAB charge remained optimistically low.
69. Bahram Bekhradnia of the Higher Education
Policy Institute told us:
We did our analysis a few months ago and showed that
this 30% RAB charge, which is the real cost to the Government,
was almost certainly a very serious understatement of the cost,
for reasons that we set out, and I think that is now fairly widely
accepted. Apart from anything else, the 30% RAB charge was based
on £6,500 or £7,000 or whatever the figure was then
being the norm, with £9,000 only the exceptional fee. Just
the increase of the average fee to much closer to £9,000
is going to drive up that RAB charge hugely.[61]
70. In addition to the effect of higher than
expected tuition fees, the Institute for Fiscal Studies also cautioned
that:
The Government's analysis over-estimates annual earnings
at the top of the distribution. Our profiles of lifetime earnings
imply average annual earnings of £60,000 in the top decile
over the period during which loans are repaid (and higher earnings
thereafter as graduates' progress through their careers). As a
result, the Government's analysis over-estimates the number of
graduates at the top of the distribution who would earn enough
to face the full 3% real interest rate while they are making repayments.[62]
71. The Higher Education Policy Institute expressed
particular concern about Government assumptions of likely earnings
growth, and the ratio of male to female graduates.[63]
HEPI calculated that a RAB charge of 47%, representing "entirely
plausible" graduate earnings growth of 3.3% per year rather
than the Government's estimate of 4.5%, would represent a 'break-even'
point at which "the savings in public expenditure on tuition
in moving to the new system are balanced by the costs".[64]
72. In his evidence to us, the Minister defended
the Government's calculations and the uncertainty around the RAB
charge:
No one can be certain. This is a set of big changes.
I am not claiming that we can be absolutely certain, but the estimate
is that in 2012, 350,000 students will be eligible for loans,
of whom 90% would take one out. That is a slight increase on the
current number; no one is obliged to take out a loan. They would
take out an average loan of £7,500, which is not the same
as saying that the fee would be £7,500, because the loan
need not be the same as the fee, though it often is. We stand
by that as a broad ballpark estimate. It adds up to about £2.4
billion of loans. The RAB charge, which is the amount that you
think you will not get back, at a rate of 30%, is about £720
million. We think that we are broadly there. But again, we will
know for sure only when those students have arrived at university
next autumn and have decided how much they want to borrow and
on what terms. I cannot give a 100% guarantee, but we still think
that that is a reasonable estimate.[65]
73. Professor Nicholas Barr of the London School
of Economics was not convinced. He argued that the Government's
proposals "will not stand the test of time" and stressed
that some teaching grant should be restored as soon as economic
conditions permit.[66]
74. It seems clear to us that the Government's
decision to shift the balance of higher education funding from
teaching grants to student loans was, in part, driven by its commitment
to reduce the deficit as quickly as possible at the same time
as aiming to create a new model for higher education. During the
debate on the floor of the House on the Browne review on 12 October
the Secretary of State explained that deficit reduction was a
factor in its policy formation:
I have already explained the necessity, for economic
reasons, of pressing ahead with these reforms. They have great
advantages in themselves, but they also help us to address the
massive deficit left by the previous Government.[67]
75. He continued:
When the Government's economic policies have produced
the successful outcome that we all expect, we can return to the
question of how universities can be supported in a more generous
way, but at the moment we face a massive financial crisis [68]
76. Regardless of the arguments both for and
against a higher level of student contribution, the financial
sustainability of the new system is untested. As a result, an
unprecedented level of uncertainty has been introduced into higher
education finances with success dependent on a large number of
variables over which the Government has little control.
77. We acknowledge that the
current proposals for student finance have been developed at a
time of severe constraints in public finances. The White Paper
states that the Government was "given the [Browne] report
in an environment when public funding had to be reduced and we
accepted the main thrust—that the beneficiaries of higher
education would have to make a larger contribution towards its
costs". It would appear that the Government has left the
door open to reducing the burden on the student should economic
circumstances improve. This approach should be made clear and
we recommend the Government set out its long-term aspiration for
Higher Education funding, in the context of improving public finances,
in its response to this Report.
78. The affordability of the
new system is dependent on a wide range of variables which are
outside of Government control. We welcome the Government's commitment
to "monitor the overall affordability of the system",
but we are not convinced that its current assessments can accurately
deliver on that. Should the loan system prove more expensive than
planned, the Government will need to act to reduce the costs of
the system and to reduce the RAB charge. In its response the Government
will need to demonstrate not only that its assessment of affordability
is accurate, but that it has robust contingency measures in place
to deliver an affordable system without cutting student numbers.
Early Repayment
79. Alongside the White Paper, the Government
published a separate consultation on "possible early repayment
mechanisms" for student loans. The question of early repayment
is crucial to the affordability of the loans system, since the
system relies on some graduates repaying substantially more than
they borrowed, in order to offset the loss made on those who do
not repay in full, or at all. The Higher Education Policy Institute
told us that the repayment consultation refers to former students
who earn enough to be charged an interest rate higher than the
cost of Government borrowing as contributing to the full cost
of their tuition but the Institute argued that those graduates
"would actually be contributing more than the full cost.
The RAB charge for these former students is negative, without
them the RAB charge [for the whole system] would be higher".[69]
80. According to the consultation document, the
Government is keen to ensure that "those on the highest incomes
after graduation are not able unfairly to buy themselves out of
this progressive system by paying off their loans early"
although "mechanisms would need to ensure that graduates
on modest incomes who strive to pay off their loans early through
regular payments are not penalised".[70]
81. The consultation offers three options:
- early repayment charges for
high payers, such as a 5% levy on repayments over £3,000
or a specified percentage of the outstanding balance;
- overpayment charges for high earners; or
- a hybrid mechanism linking charges to the amount
overpaid in a given period as well as the individual's earnings.
82. In the same consultation document, the Government
also noted that:
Voluntary early repayment of student loans currently
forms a significant part of the total volume of repayment. Many
individuals choose to make early repayments despite student loans
attracting no real rate of interest or, as in current circumstances,
a negative real rate of interest. In 2008-9 (with interest set
at RPI), of the total £939 million repayments received by
Government, £329 million were voluntary early repayments.[71]
According to figures from the Student Loans Company,
quoted in the consultation document, the median salary of those
making early repayments was £18,400.[72]
83. Penalties for early repayment have been criticised
by Martin Lewis of MoneySavingExpert and the think tank CentreForum,
both of which note that the wealthiest students (or their parents)
will be able to avoid loans or early repayment charges entirely
by paying their fees up front.[73]
CentreForum also suggests that "debt aversion not affluence"
was the biggest driver for early repayment.[74]
The Minister was reluctant to be drawn when we raised these issues
with him, but said that he would "welcome feedback, including
from, if it has a view, this Committee".[75]
84. We understand that overpayment
by some graduates is essential to the affordability of the Government's
proposed loan system, and we support a progressive system which
means that the better off make a greater contribution than those
on lower incomes. We welcome the consultation on this issue. We
believe that a fair mechanism must be found to cater for those
who wish to clear their debts more quickly but which also addresses
the issue of those seeking to avoid a progressive contribution
by paying their fees up front.
Cross-subsidy
85. Another consequence of the reforms to student
number controls and the transition from funding via the block
grant to funding via tuition fees is to reduce institutions' ability
to predict their likely income year to year, since their actual
income from tuition fees will depend to a greater degree than
at present on the A-level results and personal or family circumstances
of each year's student intake and their eligibility for fee waivers
and other reductions. Annual fluctuations could increase reliance
on the current system of 'cross-subsidy', through which fees (and
teaching grant) from courses which are cheaper to provide are
used to subsidise more expensive courses.
86. The increasing emphasis placed by the Government
on improved information, advice and guidance for students includes
the suggestion that:
As students become more discerning, we expect they
will increasingly want to know how their graduate contributions
are being spent. It would be good practice for institutions to
provide the sort of material that local councils offer to their
residents, demonstrating what their council tax is being invested
in.[76]
87. At present, local authorities are required
to itemise all spending over £500. If well-informed students
do take an increased interest in what they can expect for their
£8,000—£9,000 per year, they may not be supportive
of paying fees in excess of the cost of providing their course,
or revenue from their course fees being used to cross-subsidise
other students' courses (particularly since, as we have already
seen, the Office for Fair Access already also expects a certain
percentage of tuition fee income to be spent on measures to improve
participation and access).
88. There is a clear tension
between accountability to students for how their fees are spent,
and institutions' legitimate need to charge fees in excess of
the cost of courses in order to replace the income cut from the
block grant (and also cover the increased costs of widening participation
work required because of the higher fees). We accept that graduate
contributions towards the costs of their higher education should
rise, but we recommend that the Government explore with the sector
how to ensure that students seeking 'value for money' from their
investment can see a clear relationship between the fees they
pay and the cost of their course, while avoiding a fee structure
which potentially discourages applications to higher cost courses
in science, engineering, technology and medicine.
Support for maintenance and living
costs
89. The Government has also announced that almost
all full-time students—with the exception of those studying
full-time distance-learning courses—would be eligible for
a "maintenance loan" each year to help with living expenses.
Maintenance loans are to be 65% non means-tested: all students
will be entitled to at least 65% of the maximum loan (down from
72% in 2011), but access to the final 35% will depend on the student's
family's household income. As at present, certain students with
disabilities or caring responsibilities will also be entitled
to specific additional allowances.
90. Full-time students from lower-income households
would also be eligible to apply for a means-tested, non-repayable
"maintenance grant".[77]
If a student is eligible for a maintenance grant, the amount they
could borrow as a maintenance loan would be reduced by 50p for
every £1 of maintenance grant available to them. This is
done on the assumption that the grant will reduce the student's
need to borrow, and also steers students towards non-repayable
support rather than borrowing.
91. The Government therefore proposes the following
maximum support packages for full-time students beginning their
studies in 2012:
92. Grants are entirely means-tested. Only new
full-time students from households with an annual income of less
than £25,000 will be able to claim the full grants shown
above. Under current arrangements, students from households with
an income of up to £50,020 are eligible for at least a partial
maintenance grant. From 2012, this figure will drop to a maximum
household income of £42,600. This change in maximum income
thresholds means that the maintenance grants will be withdrawn
altogether from 2012 for new students from families with an income
between £42,600 and £50,020 pa. Most full-time students
starting higher education in 2012, except the very poorest, will
therefore receive less non-repayable support than they would have
if they started their course in 2011.
93. As shown in the table below, although most
students will have access to more money in total than they do
currently, these changes will represent a reduction in available
support of around £200 per year for new students from households
on a 'middle' income of around £50,000 per year, compared
to students from a similar financial background who begin their
studies in 2011. The Minister for Universities and Skills, David
Willetts MP, described this anomaly as a "strange kink in
the system", which the Department argued was "due to
a complicated system inherited from Labour".[
79]
[80] 2012/13 figures from BIS website[81]
94. Given the scale of the reforms being implemented,
we recommend that the Government take this opportunity to resolve
the illogical and unjustified 'kink' in the the
student maintenance model which under present proposals will reduce
the current level of support available for students from middle-income
families.
Student living costs
95. The Government's stated aim is to put "students
at the heart of the system" and we fully support its proposals
to extend student support to part-time students, introduce student
charters and improve information and feedback for all students.
No student will have to pay up-front for their tuition, and we
welcome the increase in maintenance support for the majority of
students. As Professor Arthur of the Russell Group said:
I […] see this as really quite a socially progressive
system. It allows anybody to go to university at no cost, the
Government will provide the money. It will go from BIS, to the
student loan company, to the university, and a grant will as well
for anyone earning less than £25,000, and a further loan
on the same basis, so that you do not need to spend all the hours
God sends working in Tesco to get through your studies. Anybody
from any background can go to university, and they will not, as
in the United States, a month after they graduate, start having
graduate debt repayments whether they are employed or not employed.[82]
96. However, notwithstanding the small rise in
maintenance support, we still have concerns about the levels of
support available and whether it really will be possible for students
to attend university at no cost. Several witnesses including Lord
Browne, Aaron Porter (then President of the National Union of
Students) and Simon Hughes MP (the Government's Advocate for Access
to Education) stressed the importance of ensuring students had
sufficient money while at university to cover their living costs.[83]
97. A National Union of Students survey in 2009
found that the average cost of a room in university accommodation
in 2009-10 was £3,892.62 per year, rising to £4,560.02
for accommodation in the private sector.[84]
This easily exceeds the basic non means-tested element of the
Government's proposed maintenance loan (£3,575).[85]
Even for students who are entitled to some element of means-tested
support, the Government's proposed package alone is unlikely to
adequately cover their living expenses.
98. For example, the maximum support package
which will be available to students from households on an average
income of around £35,000 per year is just over £6,000.
Assuming average accommodation costs of around £4,000 per
year, this would leave such students with around £2,000 per
year to cover the costs of books, transport, food and other living
expenses. Both the British Medical Association and British Dental
Association also identified a particular issue for students studying
clinical courses who are often unable to take on part-time work
outside their studies to supplement their incomes.[86]
99. We recommend that the Government
demonstrates its pledge to "put students at the heart of
the system" by committing to improve the student maintenance
model as soon as possible to ensure that the minimum non means-tested
support available to every student covers at least the average
annual cost of accommodation in university accommodation. This
may require working with the sector to reduce those costs.
Financial support for students
studying at "alternative providers"
100. Institutions which do not currently receive
grant funding from HEFCE ("alternative providers", in
the language of the White Paper) are not currently subject to
the regulations which impose basic and higher limits on tuition
fees. At present, certain courses provided by these institutions
may be 'designated' for student support purposes by the Secretary
of State for Business, Innovation and Skills, to enable students
studying these particular courses to access tuition fee and maintenance
loans. From 2012, the maximum tuition fee loans available to students
attending these designated courses will be increased from £3,290
to £6,000 per year (full-time) or £4,500 per year (part-time).
According to Students at the heart of the system, "this
is in line with the amount that institutions in receipt of HEFCE
grant can charge their students without putting in place an Access
Agreement".[87]
101. However, in 2012-13 it is only the value
of the tuition fee loan for these courses which is to be capped:
the course fees themselves may exceed £6,000 per year. This
means that, in 2012-13, unlike institutions which do receive HEFCE
grant funding, these alternative providers will be able charge
tuition fees in excess of £6,000 per year without having
to put in place any access agreement and their students will have
to fund the difference between the fee and the available loan
as an up-front payment. Nor will these institutions have to comply
with the requirements applying to other publicly-funded institutions
regarding provision of information or quality assurance.
102. This is an interim situation, and the Government
intends to legislate during 2012-13 to create a single regulatory
framework for all higher education institutions, regardless of
their source of funding.[88]
When we asked the Minister why it was that the public money available
to alternative providers was to be increased in 2012, despite
the absence of other significant regulatory controls, he said:
In an ideal world, we would have the whole regulatory
regime in place for 2012, but that is simply not practical given
the parliamentary timetable. […] Of course, we inherited
a system from the previous Government where a student can have
access to student loans at an independent provider, without having
to comply with the full regulatory requirements. That is what
currently happens. We will have to wait until 2012-13, parliamentary
business permitting, before we can have a single regulatory regime.
We are getting on with it as best we can.[89]
103. In supplementary evidence to the Committee,
the Department explained that "Such [alternative] providers
are not currently part of the OFFA regime and it would have been
unfair to those providers that are, had their students been free
to take out a tuition fee loan of over £6,000".[90]
104. We agree that it would not have been fair
to permit alternative providers to charge tuition fees of more
than £6,000, backed by publicly funded student support, without
having an access agreement in place. However, it does not seem
fair that alternative providers should uniquely be able to access
student support at all for courses with tuition fees in excess
of £6,000 without an access agreement in place, even if the
amount of student support itself is capped at £6,000 per
year. If alternative providers can offer viable courses in 2011
with access to publicly funded student support of only £3,290
per student per year, we do not see the need to nearly double
the public money on offer to them in the absence of any greater
safeguards over its use.
105. This arrangement partially protects the
Government's total financial exposure to uncapped fees, but does
nothing to protect the student's. We would prefer that the amount
of public funding available to alternative providers not be increased
until the new single regulatory framework is in place. As
a minimum, we recommend that the Government urgently reconsiders
its decision to increase the amount of student support available
in 2012 for designated courses provided by alternative providers
charging tuition fees of more than £6,000, unless it also
requires that some form of access agreement and the Key Information
Sets for those courses be made available.
37 Minister for Universities and Science, speech to
the British Academy 1 March 2011 Back
38 HM Treasury Spending Review 2010 (October
2010) Cm 7942, paragraph 1.47 Back
39 Department for Business, Innovation and Skills press
release, 20 October 2010 Back
40 www.bis.gov.uk Back
41 Separate arrangements will apply, at least in 2012/13,
for students attending certain 'designated courses' at higher
education institutions which do not currently receive a public
teaching grant, known as "alternative providers". Back
42 HC Deb, 12 October 2010, col 160 Back
43 HC Deb, 12 October 2010, col 161 Back
44 HC Deb, 12 October 2010, col 165 Back
45 Q 43 Back
46 Q 42 Back
47 Cm 8122, p21 Back
48 Cm 8122, p21 Back
49 Department for Business, Innovation and Skills Frequently
asked questions about student finance from 2012 http://www.bis.gov.uk/policies/higher-education/students/student-finance Back
50 Department for Business, Innovation and Skills
Frequently asked questions about student finance from 2012
http://www.bis.gov.uk/policies/higher-education/students/student-finance Back
51 HC Deb, 16 May 2011, col 108W Back
52 Q 139, quoting Professor Barr of the London School
of Economics (who also gave oral evidence to our inquiry) in A
graduate tax is for life not just for a few years (The Guardian,
Education p.10, 24 March 2009) Back
53 Ev w31 Back
54 Association of Graduate Recruiters, AGR Graduate
Recruitment Survey 2010 Winter Review (February 2010) and
High Fliers Research The Graduate Market in 2011(January
2011) Back
55 High Fliers Research The Graduate Market in 2011(January
2011) page 5 Back
56 House of Commons Library Student loan repayments
(2011/6/108SG) 16 June 2011 Back
57 Higher Education Policy Institute "Higher
Education: Students at the heart of the system"-an Analysis
of the Higher Education White Paper (August 2011) Back
58 Department for Business, Innovation and Skills,
Impact Assessment: Higher Education: Students at the heart
of the system (June 2011) page 32 Back
59 Department for Business, Innovation and Skills,
Interim Impact Assessment: Urgent reforms to higher education
funding and finance (November 2010). Back
60 Department for Business, Innovation and Skills,
Impact Assessment: Higher Education: Students at the heart
of the system (June 2011) page 54 Back
61 Q 430 Back
62 Institute for Fiscal Studies, Government proposals
for higher education would squeeze high earners less and cost
the taxpayer more, (November 2010) (http://www.ifs.org.uk/publications/5354 Back
63 Higher Education Policy Institute The Government's
proposals for higher education funding and student finance: an
analysis (14 December 2010) Back
64 Higher Education Policy Institute The Government's proposals
for higher education funding and student finance: an analysis
(14 December 2010) Annex 2 paragraph 27 Back
65 Q 668 Back
66 Ev 174 Back
67 HC Deb, 12 October 2010, col 161 Back
68 HC Deb, 12 October 2010, col 165 Back
69 Higher Education Policy Institute Higher Education: Students
at the heart of the system -an Analysis of the Higher Education
White Paper (August 2011) paragraph 26 Back
70 Higher Education: Consultation on potential early
repayment mechanisms for student loans (BIS, June 2011) page
3 Back
71 Department for Business, Innovation and Skills Higher
Education: Consultation on potential early repayment mechanisms
for student loans (June 2011) page 4 Back
72 Department for Business, Innovation and Skills Higher
Education: Consultation on potential early repayment mechanisms
for student loans (June 2011) page 4 Back
73 Martin Lewis The Seven Deadly Sins of Early Repayment
Penalties (22 March 2011) and CentreForum Early repayment
of student loans: should government impose early repayment penalties?
(September 2011) Back
74 CentreForum Early repayment of student loans:
should government impose early repayment penalties? (September
2011) Back
75 Q 680 Back
76 Cm 8122, paragraph 2.12 Back
77 Part-time students will not have access to maintenance
loans or grants, though they may of course have greater flexibility
to "earn and learn" by working alongside their studies.
Tuition fee loans to part-time students become due for repayment
from the third April after the student commenced their studies,
whether or not the student has completed the course. This means
that repayments may begin while the student is still studying
- if he or she is also earning over £21,000 per year. Back
78 The headline figure is the maximum maintenance loan
available. The figure in brackets shows the non means-tested element,
which is available to all students regardless of household income.
Back
79 Middle-class students fall victim to the great
grant and fees squeeze (14 April) Daily Mail page 24 Back
80 www.studentfinance.direct.gov.uk/portal/page?_pageid=153,4680136&_dad=portal&_schema=PORTAL Back
81 www.bis.gov.uk/policies/higher-education/students/student-finance
Back
82 Q 131 Back
83 Qq14, 183, 615 Back
84 National Union of Students Accommodation costs
survey 2009-10 page 10 Back
85 Ev 217 Back
86 Ev w11 and w13 Back
87 Cm 8122, paragraph 4.10 Back
88 Department for Business, Innovation and Skills,
A New Fit-For-Purpose Regulatory Framework for the Higher Education
Sector: Technical consultation (August 2011) Back
89 Q 724 Back
90 Ev 293 Back
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