Around a decade has passed since David Cameron’s coalition government tripled the cap on university tuition fees to £9,000, while drastically reducing direct grants to higher education institutions in England. Conveniently for a government that made cutting the deficit its raison d’etre, this manoeuvre took public spending on higher education off the books, and an accounting assumption was made that the government-backed loans would be repaid. Ten years on, there are clear signs that this funding model, and the marketised campus culture it created, is becoming dysfunctional.
In Whitehall, alarm bells are ringing over the distinctly sub-prime state of the student loan book, which the Office for National Statistics now insists is included in national accounts. Ten years ago, it was assumed that 30% of fee loans would be written off. The current estimate is well over 50%, costing the public purse about £1tn by 2040. Over 80% of students will never repay their loans in full. For students, the job market has not offered the earning opportunities anticipated by the architects of the loans system. Many graduates never come close to the £27,295 threshold at which repayments start.
As the Treasury mulls the cost implications of Boris Johnson’s “lifetime skills guarantee”, which will offer all adults four years of further education or training, a significant overhaul of the system is on the cards. All the options reportedly being considered carry significant downsides. Lowering tuition fees to £7,500, as suggested by the Augar review in 2019, would be popular with students and leave the government on the hook for less. But it would deepen the debt crisis in struggling, Covid-hit institutions, many of which spent lavishly on facilities in the race to attract students. Extending the loan repayment window beyond the current 30-year limit, or lowering the income threshold for repayments, would unfairly burden a generation already faced with prohibitive housing costs and an uncertain economic future. A cap on numbers in courses in the arts and humanities, combined with a proposed 50% cut in government funding for them, would be a philistine move. Speaking to the Guardian last week, one vice-chancellor said the coming reckoning for universities was “looking horrific”.
Some combination of these measures seems likely to be unveiled in the comprehensive spending review this autumn. But perhaps the time has come for a deeper rethink. The marketisation of the higher education sector, through the loan system, successfully expanded access and fears of social exclusion were not borne out. But the numbers are not looking good, and there has also been a significant cultural cost. Universities, increasingly run as competing businesses by overpaid vice-chancellors and a coterie of financial managers, have lost touch with the collegiate ethos that used to inform campus life. Crude systems of measurement and monitoring have eroded trust and generated false incentives, leading, for example, to grade inflation. A drive to cut costs has targeted staff pay and pensions, and created a disillusioned underclass of pitifully rewarded young academics on insecure short-term contracts. Strike action, currently taking place at the universities of Leicester and Liverpool, has become commonplace.
Removing, or greatly reducing, upfront fees and recasting the direct funding relationship between government and universities could help address such problems. The market model pioneered 10 years ago has begun to look dated and unsustainable. New thinking is needed.