Universities propose tuition fee change

By Tobias Benedetto

Graduates could pay back their loans earlier and at a higher interest rate to help deal with the higher education deficit, the UK’s top universities have suggested.

In their submission to Lord Browne’s independent review of the student funding system, the Russell Group, which represents the country’ 20 leading universities, warned the financial sustainability of its universities is “severely at risk,” and that action must be taken.

“More investment will be needed if research-intensive universities are to maintain and build on recent improvements and continue to provide an internationally excellent learning environment,” it said.

The submission says the UK’s student funding system is “one of the most generous in the world, providing all students with in-built insurance against spiralling debt and inability to repay”.

Students currently begin to pay back their loans when they start earning £15,000 a year or more, and at a low interest rate.

The Universities said: “The lack of a real rate of interest on student loans is therefore a subsidy which imposes high costs on the Government, and which exceeds the requirements of ensuring fair access to higher education. One way of modifying the current system is therefore that student loans should carry a real rate of interest; one which would be equivalent to the Government’s overall cost of borrowing.”

It added the public costs of the student finance system could be reduced by graduates paying back loans earlier, and at an increased rate.

The deficit could top £1.1 billion by 2012/13. Citing an example of current funding shortfalls, the submission says that it cost £14,190 to teach a chemistry undergraduate at a Russell Group university in 2007/08. The institution received £10,570 from tuition fees and grants – leaving a funding gap of £3,620.

The group suggests three “realistic” ways to tackle the problem: reduce costs by cutting staff; increase income through raising fees for home undergraduates or increase income through increasing fees for overseas students. None of the options could be adopted by themselves, it says. Although the submission stops short of suggesting higher tuition fees for UK students, it appears to indicate this may be the only fully workable solution.

Sally Hunt, general secretary of the University and College Union, said, “The future for the UK is, as the Russell Group report correctly identifies, as a high-skilled knowledge economy and that requires proper funding for our universities. We desperately need to overhaul how universities are funded and move away from the idea that the current review of student funding is merely a question of how much student fees go up by.”

Lord Browne’s review is due to report back to Parliament in the autumn. Both vice-chancellors and the business sector have called for higher tuition fees in the past. Tuition fees currently stand at a maximum of £3,225 per year.