Tuition fees: Heavy debts will not put students off university prize – Browne

Proposals are progressive, says thinktank, but benchmark fee would leave universities worse off

A blueprint for a transformed university system which will leave many students with massive debts after borrowing the cost of high tuition fees was unveiled today.

The review by Lord Browne, the former head of BP, proposes that universities should be allowed to decide what they charge students. The new system of financing higher education will allow for a 10% increase in student places to meet rising demand for degree-level courses.

Under Browne's proposals, graduates will only start repaying the cost of their degrees when they begin earning £21,000 a year, up from £15,000 under the current system. They will pay 9% of income above this threshold. Half of graduates currently earn £21,000 in their first job.

The influential thinktank the Institute for Fiscal Studies described this as "more progressive than under the current system … in the sense that lower-earning graduates would pay less and higher-earning graduates would pay more".

Total repayments over the working life of a typical graduate would amount to around £20,100, including maintenance loans, under the assumption of a £6,000 annual fee, the IFS said. If all universities were to charge £7,000 a year, the average graduate would repay £22,100 in total. Under the current system the average graduate pays back £15,400 over their working life.

The Browne review has sought to curb very high fees by proposing a system under which institutions that charge more than £6,000 must hand over a proportion of their income to government.

A university that charges £7,000 will receive 94% of this fee, while one that charges £10,000 will receive 81%. At £6,000, the university gets the full fee.

Browne said universities that charged the highest fees would have to demonstrate they are widening access for students from poorer homes. "There are a variety of things they can do, including offering scholarships for living expenses," he said.

Speaking after the review was published this morning, Browne said that he did not expect students to be deterred by debt. "There is a lot of evidence that students don't just look at debt, but at the prize at the end as well, which is significant earning potential. If you look at the 40% of students who study part-time, we don't offer them anything, but they still come and study part-time."

He says that should change, and part-time students should have equal entitlement to government support for tuition fees. "Part-time study provides a second chance for people who missed out earlier in their lives, and it is important to level the playing field between part-time and full-time study," the review says.

Professor Julia King, vice-chancellor of Aston University and one of the Browne review panel, predicted that some universities would charge £10,000 a year – almost three times what they do now.

The review proposes an annual loan of £3,750 for living costs, and extra support for students from poorer backgrounds whose household income is below £60,000 a year. They will be entitled to up to £3,250 in grants.

However, universities would lose money under the benchmark scenario of a £6,000 fee, the IFS said. The thinktank said: "While their fee income would nearly double in this case, buried in the detail of the review's recommendations are proposed cuts to the teaching budget that would see some courses become entirely self-funded."

The loss of teaching grants – roughly £9,900 per student over the course of a degree – outweighs the increase in fee income, and universities would have to charge fees of £7,000 a year or more to make up for this reduction in funding, the IFS said. Universities that do not have the scope to raise fees above the fee cap would have to sustain a loss.

New universities which focus on teaching arts and humanities subjects are likely to be hardest hit under the Browne review's proposals. Government funding should focus on courses such as medicine and engineering "that are important to the wellbeing of our society and to our economy," the review says.

Browne proposes a slashing of the government teaching grant from £3.5bn to £0.7bn. "There will be scope for government to withdraw public investment from many courses to contribute to wider reductions in public spending; there will remain a vital role for public investment to support priority courses and the wider benefits they create," the review says.

Browne proposes that successful universities will be able to expand, while others will have to "raise their game" in response.

The market in higher education will be driven by the choices of university candidates, based on a range of information including students' evaluation of the standard of teaching; the course and university facilities; and details provided by the university such as weekly hours of teaching time and the proportion of graduates in jobs in their first year after leaving.

David Eastwood, vice-chancellor of Birmingham University and a member of the review panel, said: "In our view the system is very much student-led and student-driven. The importance of quality in what a university is offering – teaching hours, employability – all of these are clear upfront, so the student can make an informed choice."

The review acknowledges the gulf between children from the richest and poorest families over university access. "More than half of young people from the most advantaged areas in the country enter higher education compared to fewer than a fifth of those from the most disadvantaged areas," it says. This divide is accentuated when it comes to the most competitive universities.

Universities will no longer have to provide minimum bursaries to the poorest students, who qualify for a full maintenance grant. Instead, the review proposes that they should focus on activities that may be more effective, such as outreach to schools and preparatory classes for teenagers.

Every school will also be required to make individualised careers advice available to pupils.

The Browne review says there is no evidence that the introduction of top-up fees by Labour in 2006 had a negative impact on young people from the poorest homes. It quotes research showing that in the last five years there has been a sustained increase in the number of young people from the most disadvantaged areas of the country attending university.

The boom in university participation has also led to a more diverse student body. But black students in particular are concentrated in a handful of institutions. In 2007-08 the University of East London had half as many black students as the entire Russell Group of 20 research-intensive universities, which include Oxbridge.

Sir Peter Lampl, chair of the influential education charity the Sutton Trust, said there was a danger that higher fees for the most prestigious courses would make them "the preserve of the most privileged". Even children from middle-income homes might be deterred by fears of higher costs, he said.

"There are some sensible measures in these proposals. But our concern is that the headline figure of the costs of attending more prestigious universities might still deter those from non-privileged backgrounds from applying in the first place."

How universities have reacted

Imperial College London

Undergraduate fees: £3,290 a year

Reaction: Imperial expects its fees - and those of other universities - to rise. "If fees go up, so will our financial aid to the neediest," says the rector, Sir Keith O'Nions

Cambridge University

Undergraduate fees: £3,290 a year

Reaction: Cambridge could raise fees far higher than they are now because of its international reputation and popularity. The university says it is considering Browne's recommendations and waiting for the government's response before it suggests how much it would charge

University of East London

Undergraduate fees: £3,290 a year

Reaction: UEL will not comment on how much it would charge if the review's proposals are approved. It says a significant increase in fees, such as a rise to £7,000, could disproportionately affect students from black and minority ethnic backgrounds

UEL has a higher proportion of ethnic minority students than almost every other university in the country.

University of Northampton

Undergraduate fees: £3,290 a year

Reaction: Peter Bush, the deputy vice-chancellor, says it is "highly likely" Northampton's fees will have to rise if the recommendations are adopted. He is pleased that Browne proposed that part-time students no longer pay fees upfront

Buckinghamshire New University

Undergraduate fees: £3,290 a year

Reaction: The vice-chancellor, Ruth Farwell, fears that students and universities will lose out under Browne's plan. She is worried that arts and humanities courses will have less funding

University of Leicester

Undergraduate fees: £3,290 a year

Reaction: The vice-chancellor, Bob Burgess, said lifting the £3,290 cap must be accompanied by "a comprehensive system of student support - bursaries, scholarships and loans - so that no one with the academic ability to benefit from higher education is prevented from doing so for financial reasons"

University of Dundee

Undergraduate fees: None for Scottish students

Reaction: The president of Dundee's students union was one of the signatories of a letter to the Guardian last November vowing to name and shame MPs who refused to oppose a rise in tuition fees

Harvard University

Undergraduate fees: Tuition for 2009-10 for undergraduates was $33,696 (£21,338)

How it works: Most US students pay for their university tuition through a mix of bank loans, family donations and scholarships. They have to pay back the bank loans almost immediately


Jeevan Vasagar and Jessica Shepherd

The GuardianTramp

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