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A student protests outside parliament in Westminster, against spending cuts, tuition fees and student debt.
A student protests outside parliament in Westminster, against spending cuts, tuition fees and student debt. Photograph: Richard Baker/Corbis via Getty Images
A student protests outside parliament in Westminster, against spending cuts, tuition fees and student debt. Photograph: Richard Baker/Corbis via Getty Images

Huge student debts are unfair. Let's move towards a graduate contribution

This article is more than 5 years old

The government is re-examining how universities should be paid for. It’s an opportunity to radically overhaul the system

There is one basic problem with university funding. Eighteen-year-olds bring many things with them – energy, enthusiasm, commitment, diversity – but they tend not to have any money. Universities, on the other hand, are expensive: staff, not unreasonably, want paying; utility companies expect bills to be settled; libraries, laboratories and computer suites all cost money.

Around the world, countries solve this problem in radically different ways. All have unanticipated consequences. In largely private systems, access to university is socially selective. In the US there is an almost perfect correlation between family income and university participation – which is inefficient and unfair.

In publicly funded systems, universities join the queue for cash with schools, defence, hospitals, and so on. Moreover, public funding involves the government deciding how many students should go to university – inevitably an arbitrary number.

The 2012 funding reforms in England solved the problem by providing publicly underwritten loans for (almost) the full cost of tuition. Universities got the resources they needed and students repaid at a fixed rate once their income rose above a threshold, with debts written off after 30 years.

But the language of loan, indebtedness and default has proved toxic, compounded by ill-advised decisions to raise interest rates on repayment and to abolish maintenance grants. There is a widespread view that the system is generationally unfair: today’s students get a much worse deal than their parents.

There is pressure to cut fees, which at £9,250, paid entirely by students, are now among the highest in the world. But cutting fees will mostly benefit those students who progress to the highest paid jobs and are most likely to pay off their student loan debt. Unless any cut is made up by government spending, it will also impact on university resources, reducing their capacity to provide the excellent university experience for which this country is renowned.

This would make it more difficult to properly fund high-cost subjects, including science and engineering, on which a post-Brexit economy may depend. One remedy that’s been suggested is setting different fees for different subjects. But, despite its superficial attractiveness, this builds in unhelpful incentives for student choice and, worse, assumes that the government can make students’ choices for them.

Another suggested possibility is to cut the number of students going to university. But this would be crazy in an increasingly competitive global economy. Around the world, governments are investing in their university systems because they know, as Andreas Schleicher from the Organisation for Economic Co-operation and Development puts it, “You can go in to the race to the bottom with China, lowering wages for low-skill jobs. Or you can try to win in innovation and competitiveness”.

The real question for the government’s ongoing review of post-18 education and funding is how we ensure that universities are funded properly to teach, research and innovate, while also making them accessible to students irrespective of family income. This is not easy and it involves addressing several different things at once. If I were advising the government, I’d make six changes.

For starters, we need core funding to underpin the research and innovation base across the university sector, which I would treat as an investment in national prosperity.

I would address the challenge of meeting day-to-day living costs for students through a means-tested maintenance grant, which could be framed as a social mobility investment fund. Meanwhile, sub-degree provision could be expanded in universities through incentives to students and universities, which would encourage credit accumulation and transfer schemes.

Most importantly, I’d replace the loan with a national fee bursary scheme, participation in which would trigger an obligation to make a graduate contribution payment through taxation over a time-limited period once studies are completed – not quite a graduate tax, but a more transparent repayment scheme. I would also reduce any real interest rate on post-graduation repayments.

The time has come to end the language of loan, debt and repayment, and replace it with the language of contribution, investment and return.

  • Chris Husbands is vice-chancellor of Sheffield Hallam University

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