Tuition Fees

What are tuition fees?

In September 2006 it was agreed that universities would be allowed to charge up to £3,000 a year in variable tuition fees, or top-up fees. The previous government gave an undertaken not to review the £3,000 cap until 2009 at the earliest, and to permit increases above this level, other than raising it in line with inflation, only with the approval of both Houses of Parliament.

Universities are able to charge for any full time-course, although they will have to sign an agreement with the Office of Fair Access (Offa) to charge more than £1,150 a year. Prices can vary between courses within institutions. Current fees for 2010/11 are capped at £3,290.

The majority of students will not have to pay these fees until after they have finished studying. They will instead get a student loan to cover the cost of the fees, currently to be paid back once they start earning £15,000 with interest linked to inflation.

The Coalition government elected in May 2010 announced their intention to radically reform higher education and student finance. In November 2010 the new government outlined plans to raise the cap on tuition fees in England from 2012 to £6000 and up to £9000 "in exceptional cases".

Universities and colleges will still have to justify the additional fees to the Office for Fair Access, with OFFA able to apply sanctions if necessary. Graduates will not have to begin repaying fees until they earn £21,000 - up from the current £15,000 - and a real rate of interest will be charged but with a progressive taper.

The government's proposed reforms followed an independent review of HE funding and student finance chaired by Lord Browne of Madingley which was instigated by the previous Labour government in 2009. Lord Browne's report 'Sustaining a Future for Higher Education' published in October 2010 recommended placing more of the funding burden on "successful" graduates, with repayments being made only by graduates earning £21,000 and above.

Background

The last 40 years has seen higher education (HE) in the UK transformed from an elite system to a mass participation system: between 1962 and 2002, the participation rate rose from six per cent to around 43 per cent. The Labour government is committed to seeing this proportion increase to 50 per cent.

This increase in the number of students taught in HE has not been met by proportionate increases in funding for universities and colleges. In 2003, the government maintained that HE was underfunded against its needs by around £9 billion.

However, it had long been argued that it was unfair for the general public, most of whom had not benefited from a university education, to be made to pay for the additional costs of HE, when the principal beneficiaries of it were the graduates themselves. Throughout the 1990s, the notion that the beneficiaries of HE should pay for some of the costs began to gain widespread support across the political spectrum. In 1997, Labour's manifesto stated "the costs of student maintenance should be repaid by graduates on an income-related basis".

In 1996, John Major commissioned an inquiry into long-term HE funding, chaired by Sir Ron Dearing. The report, published in July 1997, recommended that students should pay for 25 per cent of the costs of tuition. Later that month, education secretary David Blunkett introduced a new system of means-tested tuition fees, abolishing at the same time the remnants of the student grant system, something Sir Ron had rejected.

Tuition fees were first paid by students in September 1998. They were flat-rate up-front annual charges, to the value of £1,125 in 2004, which all students whose parents earned over £32,000 per annum were liable for. Those with lower family incomes were liable for reductions or were exempt.

The move was highly divisive within Labour, with many on the left of the party opposed to the notion of fees in principal, as discouraging people from low income backgrounds from pursuing HE.

The move was particularly unpopular in Scotland, where four-year degree courses are the norm. In July 1999, the Scottish Executive commissioned the Cubie inquiry to examine HE funding in Scotland.

The resultant report, published in December 1999, recommended that tuition fees in Scotland should be replaced by a graduate endowment scheme, whereby the Scottish Executive would pay the fees. Students would be required to pay £3,000 of it back when their earnings reached £25,000 a year. The executive adopted the plan in January 2000, amending the repayment figure to £2,000 and the earnings threshold to £10,000 a year.

Ahead of the 2001 general election, the Liberal Democrats campaigned on a platform of abolishing tuition fees outright, while Labour claimed in its manifesto that it had made the introduction of top-up fees illegal.

However, just two years later, following intense pressure from universities - particularly the prestigious institutions of the Russell Group - the government's May 2003 white paper included proposals for top-up fees, albeit considerably lower than those sought by the Russell Group. Shortly afterwards, the Conservatives committed themselves to abolishing fees.

The higher education bill, presented in December 2003, set out the government's plans for introducing top-up fees. The bill was tremendously divisive for Labour: Norwich MP Ian Gibson's early day motion calling for a rethink of the policy attracted 185 MPs' signatures, casting serious doubt on the government's ability to carry the bill. However, a series of "seminars" for Labour MPs and concessions made by education secretary Charles Clarke convinced enough members to approve the bill. It was passed into law as the Higher Education Act in July 2004.

Controversies

Higher education funding has been one of the most controversial and divisive issues of recent years. Although one might expect opinion on the matter to be divided along conventional left-right grounds, experience has shown this to not be the case - although the vulnerability of Labour on the issue of top-up fees may have encouraged some to adopt particular stances for political-tactical reasons, rather than on grounds of principle.

Both sides defend their position on grounds of equity. Supporters of fees argue that it is unfair on the majority of the population who have not received the benefits of HE - which are statistically agreed to be fairly substantial in terms of average salaries - to bear the full burden of the costs. As such, shortfalls in HE funding should not be paid for from tax receipts.

Opponents of fees argue that the policy is inequitable, insofar as it discourages students from low income and financially risk-averse backgrounds from entering HE. As such, they claim, the policy is exclusive and will reinforce the middle class domination of HE. Opponents generally regard the replacement of the maintenance grant with student loans as symptomatic of the same problem.

It is also claimed in some quarters that introducing fees undermines the notion of HE being about "education for its own sake", and reduces it to an economic transaction, pointing to the US model where the best universities are also the most expensive as evidence of where the policy leads.

Fees are particularly unpopular with students themselves, many of whom experience substantial financial hardship at university and extensive debts thereafter. There is evidence to suggest that many are put off from attending university at all or drop out, due to financial pressures.

There are also debates about the appropriateness of the particular schemes settled upon. Some have called for a "graduate tax" to be paid by those who have been through HE, instead of tuition fees. Prior to the higher education bill, there was also debate about the fairness of up-front fees as opposed to fees paid off in retrospect.

The tuition fees issue has also been a test case of Scottish devolution, with the abolition of fees laying a major fault-line across the British HE system. Debates continue to rage over the fairness of English students being liable for fees while at Scottish universities and vice versa.

The Coalition government's proposed reforms to tuition fees announced in November 2010 provoked huge controversy, not least because many Liberal Democrats, including Nick Clegg, Vince Cable and Sir Menzies Campbell, had signed the NUS 'Vote for Students' pledge "to vote against any increase in fees in the next parliament and to pressure the government to introduce a fairer alternative".

NUS president Aaron Porter warned: "Students will remind MPs in their constituencies of the promises they made to voters. Anyone who doubts the electoral power of the student vote should speak to former Education Secretary Charles Clarke, who lost his seat at the last election after refusing to commit to vote against higher tuition fees."

However, Business Secretary Vince Cable said the Coalition had developed a package which was "fairer than the present system of student finance and affordable for the nation", with access to higher education based on "ability, not ability to pay".

And Lord Browne's report 'Sustaining a Future for Higher Education', which recommended graduates should only begin to repay tuition fees when or if they earned £21,000 or above, estimated that only the top 40% of earners on average would pay back all the charges paid on their behalf and that 20% of the lowest earners would pay less than today.

Statistics

Under the new plans:

There will be a graduate contribution threshold of £6,000 a year.

In exceptional cases, universities will be able to charge higher contributions, up to a limit of £9,000, subject to meeting much tougher conditions on widening participation and fair access.

It will be up to the university or college to decide what it charges, including whether it charges at different levels for different courses.

Any university or college will be able to charge below £6,000.

A new £150m National Scholarships Programme will be targeted at bright potential students from poor backgrounds. It will guarantee students benefits such as a free first year or foundation year.

The Government will lend any eligible student the money to pay the university or college for tuition costs.

For the first time, part-time students will be entitled to a loan and no longer forced to pay up-front costs, so long as they are studying a third as much as a full time student.

Students from families with incomes of up to £25,000 will be entitled to a more generous student maintenance grant of up to £3,250 and those from families with incomes up to £42,000 will be entitled to a partial grant.

Maintenance loans will be available to all irrespective of income.

Graduates will not make a contribution towards tuition costs until they are earning at least £21,000, up from the current £15,000. The repayment will be on 9% of income above £21,000, and all outstanding repayments will be written off after 30 years.

In order to make the system financially sustainable, a real rate of interest will be charged on loan repayments, but with a progressive taper.

For graduates earning below £21,000, there will be no real rate of interest applied to their loan.

For graduates earning between £21,000 and around £41,000, a real rate of interest will start to be charged, reaching a maximum of RPI plus 3%.

Above £41,000, graduates will repay at the full rate of RPI plus 3%.

Under our new more progressive repayment system, 25%, and according to the IFS maybe as many as 30%, of graduates with the lowest lifetime earnings, will pay less than under the current system.

Source: BIS: Progressive plans for higher education - 3rd November 2010

Quotes

"Tuition fees through the roof... I can imagine the conversation in front rooms across the North West last night as the Government gave the green light to £9000 tuition fees - parents turning to kids and saying 'you'd better forget about University then'."

Shadow Education Secretary Andy Burnham in a speech to the Association of Directors of Adult Social Services - November 2010

"There has been much misinformation about the effect of fees on access. The evidence is clear that fees do not deter poorer students from university - particularly when combined with a progressive repayment system, precisely as the Government is proposing."

Dr Wendy Piatt, Director General of the Russell Group of research-intensive universities - November 2010

"We are taking to the streets to deliver a clear message to politicians that we want a fair and progressive system of education funding. There is nothing fair or progressive about tripling the cost of a degree and axing college grants that are often the difference between students being able to study or not."

UCU general secretary, Sally Hunt, speaking ahead of the 'Fund Our Future' demonstration in London organised jointly by the NUS and the UCU - November 2010

"We want to have a thriving university sector with excellent teaching accessible to everyone who has the ability to go. We are clear that there must be a link between the financial advantages conferred by a degree and the contribution made by the graduate. A high earning banker or lawyer should pay more than a nurse or youth worker."

Business Secretary Vince Cable - November 2010