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18.11.14

England’s tuition fees system ‘worst of both worlds’ says Higher Education Commission

The funding system for England's universities of tuition fees and repayments is the "worst of both worlds", says an independent study.

A report from the Higher Education Commission says the current university funding system is unsustainable because of the high number of students who will never be able to afford to pay off their loans after graduating,

It adds that student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period.

While tuition fees have gone up forcing students to pay more, the government is still indirectly subsidising higher education by having to write off billions of pounds of student debt.

The report 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.

Dr Ruth Thompson, the nine-month inquiry’s co-chair, said: “We have at present a funding system that represents the worst of both worlds, where all parties feel they are getting a bad deal.

“While our higher education system has the strength and resilience to withstand considerable turbulence and volatility, the commission found that present levels of uncertainty and risk mean the future financial sustainability of the current funding model is far from guaranteed.”

The Commission, set up to create a better informed debate on the university sector, with representatives from education, business and political parties, is particularly concerned about the future level of student debt with financial experts estimating that 73% of all students will still be unable to pay off their loans after 30 years, when debts are automatically wiped.

The report makes particularly mention of concern that middle earners, such as health professionals, teachers or public sector workers who need a degree to enter their profession, will not be likely to pay back their loan within the repayment period.

"The Commission fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back,” the report says.

"We are deeply concerned that the government may have created a loan repayment system where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment."

It says that he government is funding higher education by writing off student debt as opposed to directly investing in teaching grants, as it used to prior to the introduction of the current system.

The study suggests a range of alternative measures but highlights that they would each have negative as well as positive consequences. For example lowering tuition fees to £6,000 would reduce student debt, but it would leave an estimated £1.72bn funding gap for universities.

A graduate tax would require government to borrow £4bn to fill the gap between ending fees and the arrival of tax revenues, and such a tax would mean there was no clear link with the value of a particular course.

Another suggestion was removing the £9,000 upper limit on fees would allow more money for universities and clearer competition, but higher fees would mean even higher levels of public subsidy for loans.

Also different charges for different universities or courses could also reduce the number graduates from expensive courses with high fees even if they were essential for the economy.

A spokesman for the Department for Business, Innovation and Skills said the government would "look closely at the findings from the commission".

"The UK enjoys a world-renowned reputation for the quality of its universities, which we have protected and enhanced through our reforms. In fact, the OECD recently described the UK as one of the few countries that has developed a sustainable funding system for its universities."

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