In England, since 1998, home students—students from within the UK—have had to fund their undergraduate studies at university through payment of tuition fees. The cap on fees has increased steadily ever since, but in 2017 the cap was set at £9,250 per annum until 2024. University bosses have recently called for a large increase in home tuition fees from their present level to somewhere nearer £24,000 per annum, citing pressures around inflation and the devaluation of existing fee caps. Talking to The Times, Sir Chris Husbands, the vice-chancellor at Sheffield Hallam University, noted that the University sector was increasingly looking to offset costs by recruiting international students as opposed to home-students. International students’ fees are non-regulated and for most undergraduate courses are between £10,000 – £20,000, but are sometimes as high as £67,000. Husbands says that “there are high-tariff universities pulling back from the UK market because they can charge higher prices in international markets. There is an urgent need to look at UK student funding.”
The University of Oxford must surely number amongst the “high-tariff universities” Husbands refers to. At the University of Oxford undergraduate tuition fees for international students in 2023 range between £28,950 and £44,240. The proposed change to home tuition fees is meant to help redress the imbalance in the funding a university receives when it admits a home student compared to an international student. For top universities like Oxford, an international student will bring (at the lowest end) over three times as much funding as a home student. However, from the perspective of future home students in England this issue may seem very different. If Husbands’ proposed changes were to come into play, future cohorts of UK students would be paying nearly triple current costs for their university education. Of course, it’s relatively rare for UK students to pay for their courses up front. The majority pay their fees through Government tuition fee loans, which then have to be paid back from students’ future earnings. A substantial increase to tuition fees could make the prospect of a university education sound an awful lot like a lifetime saddled with debt to many home applicants.
When is a loan not a loan?
It is important to understand exactly what a student loan is in England. They are certainly not, in the ordinary sense, a loan. You do not necessarily have to pay them back, and repayments scale with income. Students must start earning over a set amount to begin paying back their loan (the threshold is currently set to £27,295, but after recent changes, this will stand at £25,000 for new borrowers from September 2023). The loans also have an expiration date: many current students or recent graduates will have their loans written off after 30 years; new borrowers in September 2023 will have theirs written off after 40. Of those full-time undergraduates starting their studies in 2021/22, around 20% were expected to pay back their loan and the interest it accrues in full, and under the new system, around 48% of borrowers are still not expected to pay back the entirety of their loan after interest.
It is perhaps more proper to describe the system of student loans in England as being formed of two parts. Firstly, a lump sum of government funding is paid out to universities at the rate of £9,250 per home student they admit (ignoring the small number who pay their own tuition fees). Secondly, what is effectively an increased rate of income tax for graduates, which helps the government recoup some of that cost. Currently, the rate is 9% of any income over a monthly threshold of £2,274. A borrower who earns £28,800 a year with a regular monthly salary of £2,400 will repay 9% of the £126 in excess of the threshold – £11. Perhaps a number of years after graduation the same borrower is earning £50,000 a year, in regular monthly instalments of £4,167. They will repay £170.37 a month. Interest accrues on the loan, usually at the rate of inflation plus 3% per annum. Repayments continue until either the whole loan, plus the interest it has accrued, is repaid, or 30-40 years have passed since repayments were due to start. If student loans were treated the same as ordinary loans, and it remained the case that 48% of borrowers were not forecast to fully repay them, then increasing the amount loaned out is the kind of decision which would get any bank reported to the Financial Conduct Authority. It is for that reason you ought to hold in mind: student loans are not loans. An increase to tuition fees and the loans which fund them does not substantially increase the amount paid back by borrowers, without accompanying changes to the repayment system. A simple increase in tuition fees and consequently in government-funded student loans would be akin to giving universities a large grant to educate UK students.
Flawed Policy
Unless the government substantially rebrands student loans, however, an increase in tuition fees will dissuade many from applying to university. This could have the absolute opposite result to what The Times suggests – an increase in home student tuition fees could reduce the pool of suitable applicants and reduce the number of UK students admitted to universities. We have seen this situation play out before. In 2020, an incoming EU-domiciled undergraduate studying at the University of Oxford would have paid home fees of £9,250. In 2021, after the UK left the EU, an incoming EU-domiciled undergraduate would have paid fees closer to £35,000. Whilst Brexit will have created many intertwined complicating effects which serve to obfuscate the pure impact of this tuition fee increase, there was an immediate shock to admissions, visible in the admissions report produced by the university. In 2021, applications from the EU dropped 22.2%. From these applicants the admissions rate dropped from 9.7% in 2020 to 6% in 2021. We reached out to the University of Oxford for comment, and we heard back from a spokesperson ‘The University regrets the decline in students from the EU, which was expected as a result of the changing fee regime occasioned by Brexit.’
That the admissions rate dropped so much more than the number of applications received suggests that raising tuition fees discouraged not just a large number of applicants from the EU, but a large number of the best applicants. Had it been the case that the drop in applications occurred evenly across all calibres of applicant, we might have expected a drop in admissions numbers – but not in admissions rate. We should hesitate to draw too many direct conclusions from this, though it illustrates an important principle: when tuition fees increase, viable candidates can be discouraged from even making an application. Decision-makers should be careful that any benefit gained from an increase in tuition fees – in theory a greater admissions rate for home students (who would then bring competitive fees with them) – is not outweighed by a decrease in the number of viable applicants, as candidates are discouraged by rising fees.
Cultural Investment
What of those degrees which already produce low-earning graduates? If increasing tuition fees reframe degrees as economic investments then we could see a drop in support for courses like Media Studies, English Literature, or Drama. Recent debate over so-called “Mickey Mouse degrees” – loosely, those which do not increase the earning potential of their recipients – forms only part of a wider debate on the purpose of universities. Particularly for a services economy like that of the UK, access to a highly educated workforce is crucial. Universities produce high-earning graduates from courses like law, economics, or computer science. From a purely economic perspective, funding the studies of a future lawyer is a more profitable operation for the government than the funding of a student studying a “Mickey Mouse degree”. They are more likely to pay back their loan and will on average contribute much more to the economy in the course of their career. However, It would be a real mistake to view degrees purely as economic investments. Universities have traditionally acted as cultural guardians, increasing access to the vast literary and artistic heritage present in this country. For Britain as it is today, perhaps one of the few things we can uncontestedly call an international success are our cultural exports. Our TV shows, our comedy and our literature is consumed and respected worldwide. For a smaller English-speaking country to maintain this home-grown engine of culture against the mighty tide of the US is a very special thing. To shun that shining legacy in favour of a slight bump in economic growth; to decry investment in our arts and culture as worthless and the stuff of Mickey Mouse is to pass over some of the most valued parts of our society. Increasing tuition fees across the board could put home applicants – or younger people planning for their futures in school – in a difficult place where they are forced to heavily weigh the economic value of their studies against any artistic passion or love of culture. If home applicants are forced to pick the most economically sensible courses by rising tuition fees, incoming arts undergraduates could become substantially more international, threatening a flourishing home-grown arts scene.
Up to Standard
Of course, no-one can be admitted if there is no course to be admitted to. In January the Office for Students published plans to introduce minimum standards for university courses. Under the plans, courses must hit certain targets – for full-time students studying their first degree, 80% must continue into their second year of study, 75% must complete their qualification, and 60% must go into professional employment or further study. If universities fail to meet these standards they can face a number of sanctions, including a restriction to student loan funding. The creation of an explicit link between quality (the plans are designed to “crack down on poor quality courses”) and employment outcomes, whilst hardly draconian, could set a fraught precedent.
Pulling up the Social Mobility Ladder
Universities serve one purpose which they can only perform with a significant number of home applicants: a university education acts as one of the most significant enablers of social mobility in this country. My own family is a case in point. Successive generations were able to better themselves through education. My great grandfather was a coal miner. His son, my grandad, was able to train at a vocational college and become a welder. His son, my father, left his council estate with a grant from the council to study at the University of St. Andrews. Now I study at the University of Oxford. Each of those steps would have been impossible without accessible education.
When asked if it was true that universities are under pressure to turn away home students in favour of international students on monetary grounds, our spokesperson from the University of Oxford replied:
‘The University of Oxford is looking for students with the highest academic potential. Everyone at Oxford gains their place based on their academic talent and ability alone – not on the fees they may bring with them. The Annual Admissions Statistical Report (published May 2022) clearly shows that UK-domiciled applicants are substantially more likely to receive an offer of a place to study at Oxford than students from outside the UK’.
University of Oxford Spokesperson
Notwithstanding this, if other universities are feeling any pressure then they should have the honesty to ask clearly for what they want – large grants to supplement the tuition fees paid by home students. Anything else risks discouraging some of the best applicants – which is detrimental to individuals, families and societies.